Construction giant Caterpillar is a key beneficiary from President Donald Trump’s tax-and-spending megabill, according to Citi Research. The “one big beautiful bill,” which was passed by Congress last week and signed by Trump on Friday, is a positive for machinery stocks, analyst Kyle Menges wrote in a Monday note to clients. Menges said key provisions of the bill support equipment demand and increased domestic industrial activity and manufacturing. Particularly supportive of these trends is the bill’s reinstatement of 100% bonus depreciation for qualifying property bought and placed in service after Jan. 19, as well as the immediate expensing of domestic R & D, he spotlighted. According to the analyst, these provisions are a boon particularly to Caterpillar, the world’s largest construction, mining and engineering equipment manufacturer. “We view Buy-rated CAT as the stand-out beneficiary of the bill as a combination of domestic tax reform, additional government funding for infrastructure, incentives for domestic manufacturing and R & D, and 100% bonus depreciation are supportive of construction equipment demand,” Menges wrote in a Tuesday note to clients. “The scaling back of clean energy tax credits also boosts the relative value proposition of CAT’s large engine & turbine offerings, in our view.” CAT 1Y mountain Caterpillar stock performance. Caterpillar stands to benefit from the bill’s allocation to construction spending, particularly for border infrastructure and defense, Menges said. Trump’s bill allocates more than $103.5 billion to construction and related spending, including $46.5 billion toward expenses related to the border wall and $45 billion to single adult detention and family residential centers. Menges said he does not expect any tax reform to make a significant effect on broad-based machinery demand in the near term. Factors such as higher interest rates and ongoing tariff uncertainty continue to weigh on customer demand, he said. Shares of Caterpillar are up 8.4% year to date. Wall Street analysts are fairly optimistic on the stock, as 13 out of 28 analysts covering the company share a strong buy or buy rating, while 15 have a hold rating. Their average price target of roughly $375 indicates nearly 4.9% potential downside.
