Caterpillar was the recipient of good news Friday, with Credit Suisse First Boson reiterating its "outperform" rating on the stock, saying the industrial giant is benefiting from overeas spending in developing economies.
''Despite investor concerns that Caterpillar has seen its best performance, we believe the company has additional room for growth,'' said CSFB analyst Jamie Cook in a research note. Caterpillar is also enjoying favorable large equipment pricing and strong growth in remanufacturing and logistics markets, Cook said.
Meanwhile, Robert W. Baird & Co. analyst Robert F. McCarthy said Caterpillar could see its quarterly sales squeezed by lower housing equipment demand, production constraints for some larger equipment, resurgent input costs and competitive pricing.
McCarthy wrote in a note that the company could exceed near-term expectations if it can overcome production constraints for large machines and engines.
''We suspect upside to management's 2006 outlook is limited,'' wrote McCarthy. The company did not issue second-quarter guidance, he said.
The analyst said political or ecnomonic constraints in developing countries could reduce demand, while declining commodity prices could reduce capital spending from clients. He said a weakness in nonresidential construction could also hurt Caterpillar's revenue.
However, McCarthy said the company enjoys a good industry pricing environment, greater-than average operating leverage with mining products, and has a significant market share of highly profitable engine and turbine production, which used in oil and gas applications.
(The Associated Press contributed to this story.)