Supply Headwinds Persist in Caterpillar's Second Quarter, but Demand Remains Strong

We continue to remain positive on the demand story for Caterpillar, despite supply headwinds. The company has been pressured by the chip shortage and higher manufacturing costs over the past year, challenging its ability to meet current demand. However, we believe construction activity will continue to improve in the near term, giving us confidence that Caterpillar’s products will see strong demand from customers over our forecast. In addition, we think the construction industry will benefit from increased U.S. infrastructure spending starting in 2023. Given this backdrop, we've raised our fair value estimate to $193 per share from $189.