Morgan Stanley analyst Courtney Yakavonis initiated coverage of the Construction Machinery space, starting Caterpillar (CAT) with an Overweight rating and $185 price target.

Construction machinery stocks have outperformed since 2016, but a recovery in the global economy and key end markets leads Yakavonis to believe that there could be further to go, she tells investors.

The firm's most recent dealer survey indicates points to inventories having been "right-sized" compared to 2016 and Caterpillar's strong top-line momentum, further margin expansion opportunities, and attractive valuation make it her top pick in the space, she said.