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Call of the week: Caterpillar downgraded on concern about Trump's infrastructure plan

Yahoo Finance’s call of the week is a cautious call by one bank on Caterpillar (CAT). Deutsche Bank (DB) downgraded the heavy equipment maker to hold from buy and lowered its price target on the stock to $106 from $121, which was among the highest on the Street.

Analyst Nicole DeBlase wrote in a research note on Friday that a reason for the downgrade was because of questions surrounding President Donald Trump’s ability to get a $1 trillion infrastructure bill passed. DeBlase noted, “Without an infrastructure stimulus, we see little prospects for continued [North America non-residential] construction growth.”

Hope of the new administration getting an infrastructure bill passed through Congress is what fueled Caterpillar’s recent rally. Investors started buying the stock, betting that improvements to roads, airports and bridges would boost demand for the company’s heavy machinery. Shares have soared since the US presidential election on November 8, climbing about 24% during that time. Caterpillar added to those gains earlier this week, touching a three-year high of $108.18 a share on Tuesday.

As Trump struggles to drum up support for his initiative, Wall Street is beginning to question whether the recent rally in Caterpillar and other industry heavyweights like Deere & Company are justified. DeBlase wrote she had “no idea” when a plan would materialize and thinks much of the recovery in mining has already been priced into the stock.

Analysts’ views on Caterpillar are mixed. The stock has a total of nine buy, 15 hold and three sell ratings on the Street, according to Bloomberg. Investors will get a glimpse inside Caterpillar’s business when the company reports second quarter results on July 25.