Caterpillar is Thursday's IBD Stock Of The Day as the Dow Jones construction and mining equipment giant got a lift from United Rentals' positive outlook and economic data showing an ideal mix of lower inflation and faster-than-expected growth. CAT stock reentered a buy zone as URI stock led S&P 500 percentage gainers.
Q4 Earnings
"We continue to see broad-based demand across geographies, verticals and customer segments," United Rentals CEO Matthew Flannery said in a Thursday morning earnings call.
Flannery said customers kicked off a diverse set of projects last year including battery plants, semiconductor-related facilities, infrastructure, power and data centers. "We expect 2024 to be another year of growth led by large projects."
URI topped Q4 estimates with 16% EPS growth and 13% sales growth. The company also offered a 2024 revenue outlook of $14.65 billion to $15.15 billion, with the midpoint up 4% from 2023 totals.
Caterpillar is due to report Q4 results on Feb. 5. CAT stock initially suffered a letdown after its Q3 results as Wall Street reacted negatively to a $2.6 billion backlog decrease.
Analysts expect Caterpillar to post 23% EPS growth to $4.76, according to FactSet. Revenue is expected to grow 3% to $17.06 billion.
GDP Report
The government's initial estimate of Q4 GDP growth showed the economy grew at a faster-than-expected 3.3% rate vs. forecasts of 2.5%. Yet tame inflation, with the Fed's primary inflation gauge rising at just a 2% annualized rate, led markets to price in higher odds of a near-term Fed rate cut.
The GDP report showed that real spending by the private sector on nonresidential structures grew at a solid 3.2% clip in Q4. That was down from double-digit percentage increases the prior three quarters. Spending surged thanks in no small part to three big government spending bills to fund infrastructure, domestic chip investment and green-energy projects.
"The level of spending remains hugely elevated, but the growth rate is headed toward zero," Ian Shepherdson, chief economist at Pantheon Macroeconomics, predicted in a research note.
CAT Stock
CAT stock climbed 3.5% to 300.77 in Thursday stock market action, reclaiming a 293.88 buy point from a consolidation that began in early August, according to a MarketSmith analysis.
The move extends a bullish rebound from the 21-day and 10-week lines.
The buy zone runs through 308.57. CAT stock closed at an all-time high. Previously CAT stock had edged past the buy point but stalled out a hair below 300 in consecutive sessions in late December.
URI stock, which was already flirting with a record high going into earnings, soared 13% to 651.64. A plan to buy back $1.5 billion of its stock and boost its dividend by 10% helped fuel the gains.
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