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Baird analyst Mircea Dobre raised the firm's price target on Caterpillar (CAT) to $220 from $206 and keeps an Outperform rating on the shares.

The analyst named the company a top idea for 2021.

Dobre sees a setup similar to 2010 and 2017, where Caterpillar shares outperformed by 50% both years, for 2021. Key global end markets are set to improve with retail demand poised to accelerate against easy prior-year comparisons, Dobre tells investors in a research note. Caterpillar's growth will be further aided by a destocked dealer channel with restocking potential emerging late 2021 and into 2022, adds the analyst.

He says the stock typically outperforms as retail sales and relative earnings growth accelerate. Both factors should drive Caterpillar shares higher in 2021, contends Dobre.