Caterpillar rises on Bank of America upgrade

Caterpillar Inc., the world's largest maker of construction equipment, rose the most since April after a Bank of America Corp. analyst raised his rating on the shares and said the construction market has bottomed.

Caterpillar gained $2.25, or 6.6 percent, to $36.24 at 2:03 p.m. in New York Stock Exchange composite trading. The shares earlier rose as much as 8.1 percent, the biggest intraday gain since April 22. Peoria, Illinois-based Caterpillar declined 24 percent this year through July 17.

"Our channel checks show signs of a construction-market bottom with sharply lower inventories and better purchasing outlook by the dealers," Andrew Obin, an analyst with Bank of America in New York, said in a note to investors today. Obin boosted his rating on the shares to "buy" from "neutral."

Caterpillar's second-quarter results, which are scheduled to be reported tomorrow, will mark the bottom for the company's machinery unit and the engine segment will stabilize in the second half, Obin said.

The quarter "is likely to be tough, but we don't think it matters," Obin said. He predicts second-quarter profit of 21 cents, excluding certain costs. That's 1 cent lower than the 22-cent average estimate of 20 analysts in a Bloomberg survey.

Analysts predict sales of $8.78 billion, the median of 14 estimates in a Bloomberg survey

Locally, Caterpillar has operations in Montgomery.