Caterpillar shares rise on upgrade, 4Q report

BOSTON (AP) -- Shares of Caterpillar Inc. climbed on Tuesday after an analyst upgraded the stock, saying the company has clearly explained to investors the risks it faces, which could help lift the stock.

Other analysts who reviewed Caterpillar's fourth-quarter earnings offered mixed assessments of prospects for the largest maker of construction and mining equipment. Some cited risks for Caterpillar if the global mining outlook doesn't improve.

The company on Monday reported a sharply lower fourth-quarter profit, in part due to a deal in China that soured, and slower economic growth around most of the world.

Caterpillar said that its first quarter revenue and profits will be "significantly lower" than the same period last year. The Peoria, Ill.-based company also warned that its full-year profit could shrink if the global economy doesn't pick up in the second half of the year, as mining companies and builders remain cautious about buying new gear.

Shares of Caterpillar rose following Monday morning's earnings report, closing up 2 percent. The stock continued to rise on Tuesday, gaining $1.02, or about 1 percent, to $98.47 in afternoon trading. Shares of Caterpillar are up nearly 10 percent this year, topping the 5.6 percent gain in the Standard & Poor's 500 index.

One catalyst on Tuesday was an upgrade from BMO Capital Markets analyst Joel Tiss, who lifted his rating to "Outperform" from "Market Perform."

Tiss said in a note to clients that the stock could rise higher as a result of several factors, including increasing optimism among investors, and the desire of money managers to invest in construction-related industries and take advantage of pent-up demand in that segment of the global economy. He also said Caterpillar faces "well-defined headwinds."

Shares of Caterpillar rose on Monday because "investors now believe the bad news is out and are willing to look past the near-term obstacles," Tiss said.

William Blair & Co. analyst Lawrence De Maria said inventory reductions that Caterpillar reported in the latest quarter were "dramatic" and better than he had anticipated. The company and its dealers have both been trying to sell off inventory, and Caterpillar said that reduced production will continue at least through the first quarter.

De Maria, who maintains an "Outperform" rating on the stock, said Caterpillar's "cautiously optimistic view of the world and conservative guidance should help set up for positive earnings surprises in 2013."

The biggest factor driving the stock's performance will probably be the global mining outlook into 2014, he said.

Jefferies & Co. analyst Stephen Volkmann, who maintains a "Hold" rating on Caterpillar, also called the mining outlook critical. The company "still needs additional mining orders in 2013 to fill out its production schedule," he said in a note to clients.