Analyst Stephen Volkmann of Jefferies discussed Caterpillar Inc. (NYSE:CAT) after recently hosting investors for a plant tour and management meetings in Peoria, IL. Each member of management that attended discussed a different aspect of the company.

Denise Johnson, the Group President, spoke about Resource Industries. From what the analyst understood, the company’s segment goal “is to lower the breakeven point to the current levels of business.” Volkmann sees this more as a long-term goal. Johnson noted inquires for rebuilds and OE equipment have increased this past half year, but “order trends have not yet followed.” It was also mentioned that used and idle equipment is an overhang for CAT, and pricing, which is down 3-4%, is still a challenge.

Mike DeWalt, VP of Financial Services, spoke about the Financial Details for CAT. Volkmann now believes that CAT will have some EPS tailwinds in 2017 as revenue flattens. The analyst doesn’t think underabsorbtion in 2016 will be as bad initially expected. Furthermore, inventory may be down $500-$600 million and compensation may not reach the analyst’s assumed level of full $850 million.

Afterwards, CEO Doug Oberhelman discussed CAT’s big picture outlook. He noted that CAT’s cost cuts have been significant and should result in higher margins, once revenues recover. Management current seems “fairly downbeat regarding end markets.” The analyst expects to see major changes in the “offing for the business portfolio as CAT has somewhat limited flexibility under the current credit rating.”

CAT has $2 billion plans to restructure in 2017 and part of 2018. The analyst took away that the 2017 restructuring chargers are on par with 2016 instead of declining. He states that the good news is, “that 2018 should show significant benefits from these actions.”

The analyst maintained his Hold rating for CAT with a price target of $72, marking a 12% decline from current levels.

According to TipRanks, Volkmann has a yearly average return of 6.7% and a 65% success rate. The analyst is ranked #424 out of 4,085 analysts.

TipRanks shows that out of the 7 analysts who rated CAT in the last 3 months, 14% gave a Buy rating and 86% gave a Hold rating. The average 12-month price target for the stock is $78.17, marking a 4.71% decline from current levels.