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Caterpillar Inc. (CAT), headquartered in Irving, Texas, is recognized worldwide for its construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Valued at $162.05 billion by market cap, the company serves the construction, mining, forestry, farming, and other markets through its global dealer network.
Companies worth $10 billion or more are generally described as “large-cap stocks,” and CAT definitely fits that description, reflecting its leadership in the farm and construction equipment market.
However, the leading heavy equipment manufacturer has fallen 14.3% from its 52-week high of $382.01, which it hit on Apr. 8. Shares of CAT are down 3.3% over the past three months, underperforming the broader S&P 500 Industrial Sector SPDR’s (XLI) 0.2% decline over the same time frame.
Longer term, CAT shares rose 44.5% over the past year, and in 2024, the stock is up 10.8%. By contrast, the XLI is up 6.8% on a YTD basis and 20.6% over the past 52 weeks.
To confirm the recent bearish price trend, CAT has been trading below its 50-day since late May. However, the stock is trading above its 200-day moving average since late November 2023, indicating a long-term bullish trend.
CAT’s underperformance over the past three months can be attributed to its Q1 results. Due to high interest rates, the heavy equipment manufacturer is facing a dwindling order backlog. Consolidated sales and revenue declined marginally year over year to $15.90 billion, with management blaming lower sales volume in Europe, the Middle East and Africa, and the Asia-Pacific region. At the end of Q1, the company’s backlog stood at $27.90 billion, a decline of $2.50 billion from the prior-year quarter.
However, price hikes helped the company deliver a 22.2% adjusted operating profit margin during the quarter, a 10-year quarterly high. The management said that it remains optimistic about benefiting from the government’s infrastructure projects under the $1 trillion Infrastructure Investment and Jobs Act. Shares of CAT fell 25.5% on Apr. 25 after the company reported its Q1 results.
To emphasize the stock’s overall outperformance, top rival Deere & Company (DE) is underperforming – not just CAT, but the broader sector, as well. DE stock has declined 0.5% in the past 52 weeks and 7.6% on a YTD basis.
Despite its recent underperformance compared to the sector, analysts continue to remain optimistic about CAT’s prospects. The stock has a consensus rating of “Moderate Buy” from the 20 analysts in coverage, and the mean price target of $343.22 is a premium of 4.8% to current levels.
On the date of publication, Dipanjan Banchur did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
