Caterpillar’s Earnings Report


Caterpillar, the renowned manufacturer of heavy equipment, is set to release its earnings report soon, and all eyes are on Wall Street. While the company benefits from the booming construction industry in the U.S., there is growing concern among investors about a potential economic slowdown.

The anticipated earnings report on Tuesday morning has prompted Wall Street to expect earnings per share of $4.57 from $16.5 billion in sales. In the first quarter of 2023, Caterpillar reported a profit of $4.91 per share, with sales amounting to $15.9 billion. Similarly, in the second quarter of 2022, Cat reported an EPS of $3.18 from sales of $14.2 billion.

Although sales have been on an upward trajectory, a sense of caution prevails amidst fears that this might be the peak. This shift in sentiment is evident from the changes in valuations. At the beginning of 2023, Cat stock was trading at approximately 17 times the estimated earnings for 2024. However, it is currently trading at around 14 times.

Interestingly, despite the increase in earnings estimates, investors are no longer willing to pay a premium for a stock that is projected to generate higher profits per share. At the start of 2023, Wall Street expected 2024 earnings per share of around $17, a figure that has now risen to about $18.50.

As the earnings report looms, it becomes apparent that the stock market is always looking ahead, ready to embrace or fear what lies beyond the horizon. The performance and projections of Caterpillar serve as a valuable barometer for investors and Wall Street as a whole.

Wall Street Analysts Mixed on Cat Stock

Wall Street sentiment towards Cat stock has shifted, with approximately 42% of analysts giving it a Buy rating. This is lower than the average Buy-rating ratio of stocks in the S&P 500, which stands at around 55%. A year ago, around 50% of analysts rated Cat shares as Buy.

The average analyst price target for Cat stock is approximately $255 per share, slightly below its closing price on Monday, which was $265.19. Comparatively, a year ago, the average price target was roughly $222.

However, there are signs that things may be “slowly slowing.” Baird analyst Mig Dobre highlighted that dealer inventories are on the rise, leading to downward pressure on equipment prices, while the backlog of orders is decreasing.

This slowdown is occurring despite the booming construction activity, fueled by government-supported spending associated with new legislation such as the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. Over the past few months, U.S. nonresidential construction activity has been running at an annualized rate of approximately $1 trillion, reaching close to record levels.

Currently, the potential negatives seem to outweigh the positives. Dobre himself rates Cat shares as Sell and has set a target price of $183 for the stock.

Investors and analysts eagerly await the conference call hosted by management at 8:30 a.m. Eastern time to discuss the company’s results. They hope to gain insights into how the current cycle is developing and what lies ahead.

Leave a Reply

Your email address will not be published. Required fields are marked *

Previous Post

Impressive Performance of U.S. Stocks in 2021

Next Post

Uranium Energy Completes Initial Phase of Development in Wyoming

Related Posts