U.S. Markets closed

J.P. Morgan upgrades rating on Caterpillar

The Associated Press

J.P. Morgan analyst Ann Duignan raised her rating on Caterpillar Inc. on Tuesday, saying that most of the company's risk is already factored into its share price.

THE OPINION: Caterpillar's shares had fallen about 20 percent from February until Friday, just ahead of its first-quarter earnings.

The company reported Monday that a slowdown in the mining business drove its first-quarter profit down by 45 percent. The company also lowered its expectations for full-year sales and profit because the weakness in the mining business. Profit margins are higher for mining gear than for many of Caterpillar's other products, making the slowdown more painful for the company's earnings.

Despite the tough quarter, Duignan said Tuesday that most of the downside risk for the company has already been priced into the stock. She raised her rating on the company's stock from "Neutral" to "Overweight".

While several risks remain for the company, the analyst said she sees gains ahead based on its presence in emerging markets and other long-term growth prospects. The disappointing mining news on Monday also overshadowed its sales gains in China and its plans to buy back about $1 billion worth of shares, its first repurchase program since 2008.

Duignan also increased her price target to $100 from $93.

A spokesman for Caterpillar declined to comment on the ratings upgrade.

THE STOCK: Caterpillar's shares increased $1.36, or 1.7 percent, to $84.10 on Tuesday. Its stock price still remains at the lower end of its 52-week trading range of $78.25 to $108.79.