Caterpillars E&T Segment: A Key Driver for Next EPS Cycle, According to BofA Analysts

Bank of America analysts have reaffirmed their Buy rating on Caterpillar (NYSE: CAT), with a price target of $385 per share. The analysts point to the company's Energy & Transportation (E&T) division as the key growth engine for the next earnings per share (EPS) cycle. The E&T segment, which accounts for roughly 40% of CAT's sales, is expected to outpace core CAT growth and add incremental EPS power of $3-3.50 as new infrastructure trends take hold. The analysts attribute the E&T growth to several factors, including renewed pipeline expansion in the Oil & Gas sector, which accounts for 29% of E&T revenue. They expect Caterpillar to benefit from policy tailwinds from the Trump administration, rising LNG export interest, and expected utility demand for gas infrastructure into the 2030s. In addition, the Power Generation vertical, which accounts for 32% of E&T, is reported to be the fastest-growing segment. With data centers driving soaring power needs, backup generation demand is surging. The analysts noted that new, bigger data centers can have up to 60 large CAT engine generators at a site. Furthermore, Caterpillar's largest turbine, the Titan-350, offers "prime" power potential by generating 38MW—enough to support grid stability. The analysts also highlighted upcoming catalysts, including a tour of CAT's engine facility and meetings with its largest dealer, which could offer further insight into the segment's upside. They look for clues to quantify the engine opportunity and growth opportunity into 2026. Overall, the E&T segment is said to support diversification and a higher through-cycle EPS profile for Caterpillar. The analysts' confidence in the E&T division is likely to drive investor interest in the company as it navigates through the next EPS cycle.