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Caterpillar Inc. (CAT), headquartered in Irving, Texas, manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Valued at $164.34 billion by market cap, the company also manufactures engines and other parts for its equipment and offers financing and insurance. The leading construction and mining equipment manufacturer is expected to announce its fiscal second-quarter earnings for 2024 before the market opens on Tuesday, Aug. 6.
Ahead of the event, analysts expect CAT to report a profit of $5.53 per share on a diluted basis, down marginally from $5.55 per share in the year-ago quarter. The company has consistently surpassed Wall Street’s EPS estimates in its last four quarterly reports. During the previous quarter, the company returned $5.10 billion to shareholders as dividends and share repurchases.
For the full year, analysts expect CAT to report EPS of $21.61, up 1.9% from $21.21 in fiscal 2023.
CAT stock has outperformed the S&P 500’s ($SPX) 18.7% gains over the past 52 weeks, with shares up 27.7% during this period. Similarly, it outshined the S&P 500 Industrial Sector SPDR’s (XLI) 12.5% gains over the same time frame.
On Apr. 25, CAT shares closed down more than 6% after the company said it expects sales for Q2 to be lower than last year. In Q1, its adjusted EPS of $5.60 topped Wall Street expectations of $5.12. The company’s revenue of $15.80 billion fell short of Wall Street forecasts of $16.07 billion. Its order backlog increased to $27.9 billion, up $400 million sequentially, led by Energy & Transportation.
CAT expects 2024 sales to remain similar to 2023’s level. Although softer demand in Europe is anticipated to affect the Construction Industries segment’s topline, stronger sales from the Energy & Transportation segment are expected to offset it. Meanwhile, services revenue from its segments is forecasted to be higher this year, keeping it on track to achieve 2026’s target of $28 billion. CAT shares have been on a downtrend since the day the results were released.
CAT's overall performance can be attributed to its exposure to new economy themes. The company finds itself at an interesting juncture as it is likely to play a key role in the energy transition and will likely benefit from the growing digital capabilities of machinery and equipment. Its machinery, energy, and transportation (ME&T) businesses specialize in heavy-duty machinery for the construction of renewable energy infrastructure and transmission and distribution networks.
Meanwhile, the new economy requires metals such as copper, nickel, cobalt, etc., due to their growing usage in EVs, smart devices, and solar panels. CAT’s mining machinery will likely play a crucial role in this mining. CAT is also offering aftermarket parts online and using data analytics and machine learning to boost its service revenue as they help predict service events, thus reducing machine downtime.
Analysts’ consensus opinion on CAT stock is bullish, with a “Moderate Buy” rating overall. Out of 19 analysts covering the stock, six advise a “Strong Buy” rating, one suggests a “Moderate Buy” rating, 10 give a “Hold” rating, and two recommend a “Strong Sell.” The average analyst price target for CAT is $350.76, indicating a potential upside of 4.4% from the 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.
