Caterpillar shares $6 away from a new low and reporting earnings next Friday

The one and only Caterpillar Inc. (Public, NYSE:CAT) reports Q4 and Full Year 2007 Earnings next Friday (1/25) and there is a ton on the line.  CAT's shares are much closer to it's 52-week low of $57.98 and the 52-week high of $87 seems like a lifetime ago.  However Stifel Nicolaus & Co. raised their rating on Caterpillar Inc. last Friday, saying the company and the stock should stay strong in spite of a contraction in the manufacturing sector.  So should you place your bet prior to the earnings call?

Fellow Masters, it's been a horrible market, no hiding that factor and a monster like Caterpillar could help you regain some lost bucks in the coming months. Here's what Stifel Nicolaus said: Barry Bannister upgraded the stock to "Buy" from "Hold," and set a target price of $81 per share. He said he does not think Caterpillar shares will go any lower than $63 in the next year and shares today are trading around $64.70. Barry's price target implies the stock will rise 20%, and he thinks it will reach that level by spring.

Last week, an Institute for Supply Management survey showed that manufacturing decreased in December, the first such move in 10 months. Bannister said that will not be a big issue for Caterpillar because commodity prices and demand are strong.

Barry Bannister went on to say that investors are overlooking other positive factors. "Caterpillar stock is the cheapest it has been versus the stock of Deere & Co. in 15 years," he wrote. "We are quite aware of the positive fundamentals for agriculture, but we feel the positive trends for infrastructure embedded in Caterpillar stock may be underappreciated."

Caterpillar is increasing is international sales, he added, and U.S. sales make up the smallest portion of the company's total revenue in 30 years. Bannister expects the Peoria, Ill., company to return a profit of $5.78 per share in 2008. Analysts reporting to Thomson Financial expect $6.02 per share.

The Masters love the 36 Cent dividend paid every quarter and the analyst support CAT has going for them.  If they blow the call next week, CAT's shares will be worth picking up on the dive.  It's hard to think long-term right now when your stocks are taking a beating, but consider Caterpillar shares have returned 13.5% annually over the past two decades.

DayTradeTeam.com wrote today that over the last six months Caterpillar Inc (NYSE:CAT) has created a downtrend channel. Right now CAT is at downtrend support, which indicates CAT will see some buying over the next couple weeks. This buying could push CAT back above $70 and possibly above $72.50. Watch how CAT behaves over the next couple of days, if it is able to hold up in this down market they recommend going long and play the channel.

Masters, consider making a small position before next Friday then if they blow the call, buy more, or just wait for the outcome.  The dividend makes it worth building a position today, and we recommend getting in at the mid $60's.