Caterpillar’s E&T segment is likely a core driver to the next EPS cycle: BofA

Investing.com -- Bank of America analysts say Caterpillar’s Energy & Transportation (E&T) division is set to become the company’s key growth engine, citing strong multi-year tailwinds from data centers, power generation, and gas pipelines.

In a new note, BofA reiterated its Buy rating on Caterpillar (NYSE:CAT) with a price target of $385 a share, calling the E&T segment—roughly 40% of CAT’s sales—“the least understood yet... the likely core driver to the next EPS cycle.”

According to the analysts, “E&T growth is outpacing core CAT,” and could add “incremental $3-3.50 of EPS power” as new infrastructure trends take hold. 

The segment is said to support diversification and “a higher through-cycle EPS profile,” they added.

In the Oil & Gas sector, which accounts for 29% of E&T revenue, Caterpillar is expected to benefit from renewed pipeline expansion, according to the bank. 

“Gas midstream...and more pipeline capex is on the way,” BofA said, citing policy tailwinds from the Trump administration, rising LNG export interest, and expected utility demand for gas infrastructure into the 2030s.

Power Generation (HM:PGV), which accounts for 32% of E&T, is reportedly the fastest-growing vertical. 

With data centers driving soaring power needs, backup generation demand is surging. “New, bigger data centers can have ~60 large CAT engine generators at a site,” BofA noted. 

In addition, they said the company’s largest turbine, the Titan-350, offers “prime” power potential by generating 38MW—enough to support grid stability.

BofA 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. 

“We look for clues to quantify the engine opportunity... and growth opportunity into 2026,” the analysts said.