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Caterpillar Says Howdy to Texas

Story Highlights

Caterpillar follows major corporations in shifting its headquarters to a corporate-friendly destination like Texas.

Construction and equipment major Caterpillar Inc. (NYSE: CAT) recently revealed that it will be shifting its global headquarters to Texas from Illinois. Shares of the company declined marginally to close at $206 on Wednesday.

Caterpillar’s existing office in Irving, TX, in the suburbs of Dallas, will serve as the company’s new global headquarters. The company further revealed that it did not receive any economic or tax incentives for this move.

Caterpillar will continue to employ 17,000 people in Illinois.

Due to its cheaper real estate market, tax incentives and larger and flexible workforce, numerous corporate giants have made Texas their home in recent years. Earlier, companies like Tesla (TSLA), Oracle (ORCL) and Hewlett Packard (HPE) moved their bases to the state.

The CEO of Caterpillar, Jim Umpleby, said, “We believe it’s in the best strategic interest of the company to make this move.”

Stock Rating

Recently, Bank of America Securities analyst Michael Feniger reiterated a Hold rating on the stock with a price target of $224, which implies upside potential of 8.7% from current levels.

The analyst, after a call with Caterpillar’s Group President of Resource Industries Denise Johnson, opined, “CAT’s tech leadership is impressive. In our view, a more significant, sustained step up in pricing power could help illustrate that CAT is getting fully rewarded for its tech and underpin a re-rating story.”

Overall, the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 11 Buys, three Holds and two Sells. CAT’s average price target of $240.93 implies that the stock has upside potential of 17% from current levels.

Investors Are Positive

TipRanks’ Stock Investors tool shows that investors currently have a Positive stance on CAT, as 1.1% of the top portfolios tracked by TipRanks increased their exposure to CAT stock over the past 30 days.

Conclusion

Caterpillar’s move to shift its headquarters to Texas is strategic, as the company plans to take advantage of the state’s favorable corporate environment. Further, the decision is expected to help Caterpillar in boosting its operations and profits.

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