Caterpillar Inc (CAT)

[NovoMira]

Industrials rally as Morgan Stanley sees more upside

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- Caterpillar Inc. and other industrials got a lift Tuesday after Morgan Stanley offered a brighter view of the company and the sector.

Saying it now sees "substantially more upside" for industrial stocks than the overall Standard & Poor's 500 Index (INDEX:SPX) , Morgan Stanley pointed to sharply rising orders and structural cost improvements as among the sector's underlying bullish factors. "In short, fundamentals have caught up and now surpass multiples that have contracted recently to highly attractive levels," Morgan Stanley analyst Scott Davis wrote in a note to clients.

The analyst also upgraded Caterpillar Inc. (NYSE:CAT) , a component of the Dow Jones Industrial Average (INDEX:INDU) , to overweight from underweight, hiking his price target on its shares to $70 from $51.

Leading gains on the Dow, shares of Caterpillar were up 4.8%.

Off the Dow, Caterpillar's rivals Cummins Inc. (NYSE:CMI) and Navistar International Corp. (NYSE:NAV) gained as well, up 3.2% and 2.9%, respectively.

Davis also upgraded Rockwell Automation Inc. (NYSE:ROK) and Ingersoll-Rand Plc (NYSE:IR) to equal weight from underweight.

Rockwell shares were lately up 2%, and Ingersoll-Rand gained 2.6%.

The Industrial Select Sector SPDR (NYSE:XLI) , which tracks companies in aerospace, defense, building products, engineering and construction, rose 1.3%.