Caterpillar (CAT) - Get Report shares rose more than 1% on Thursday morning after Bank of America Merrill Lynch upgraded them to buy from neutral on expectations of an earnings beat and a dividend increase later this year.

The analysts also raised their CAT price target to $120 from $105.

The analysts also said that the heavy equipment maker's mining business has bright prospects and they pointed out that CAT itself has suggested its customers will need to replace 700 vehicles.

Shares of Caterpillar traded Thursday morning at $101.58, up $1.20.

Last month the construction and mining equipment manufacturer disclosed in an SEC filing that it does not expect ongoing investigations related to its accounting practices to have a material adverse impact on its financial results.

"The company is unable to predict the outcome or reasonably estimate any potential loss; however, we currently believe that this matter will not have a material adverse effect on the company's consolidated results of operations, financial position or liquidity," Caterpillar said.

U.S. authorities raided three of the company's offices in Illinois in March as part of an investigation by the IRS regarding profits at Caterpillar's Swiss business.