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Pro Analysis

Deutsche Bank says Caterpillar to rally 19%

A technician works on a Caterpillar 259D compact track loader at the Altorfer Cat dealership in East Peoria, Illinois.
Daniel Acker | Bloomberg | Getty Images
A technician works on a Caterpillar 259D compact track loader at the Altorfer Cat dealership in East Peoria, Illinois.

Deutsche Bank initiated a buy rating on Caterpillar on Wednesday, making the machinery maker the firm's top pick in the industrial space on the notion that earnings have finally bottomed.

An earnings inflection point could propel the stock to the $98 level in the next 12 months, implying a rally of 19 percent, according to Deutsche Bank analysts.

"Over the past three years, it has been difficult for investors to gain visibility on EPS downside — essentially, the market did not believe earnings had reached bottom. But now, with 64 percent of company revenues at trough levels and the bulk of the natural resource downturn in the rearview mirror, we do believe that 2016e will represent the cyclical trough," wrote research analyst Nicole DeBlase.