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Caterpillar Inc. (CAT) Hits Fresh High: Is There Still Room to Run?
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Have you been paying attention to shares of Caterpillar (CAT - Free Report) ? Shares have been on the move with the stock up 2% over the past month. The stock hit a new 52-week high of $241.91 in the previous session. Caterpillar has gained 16.9% since the start of the year compared to the -11% move for the Zacks Industrial Products sector and the 16.9% return for the Zacks Manufacturing - Construction and Mining industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 27, 2022, Caterpillar reported EPS of $3.95 versus consensus estimate of $3.19 while it beat the consensus revenue estimate by 4.57%.
For the current fiscal year, Caterpillar is expected to post earnings of $13.85 per share on $58.73 billion in revenues. This represents a 28.12% change in EPS on a 15.23% change in revenues. For the next fiscal year, the company is expected to earn $14.90 per share on $61.54 billion in revenues. This represents a year-over-year change of 7.62% and 4.78%, respectively.
Valuation Metrics
Caterpillar may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Caterpillar has a Value Score of D. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 17.5X current fiscal year EPS estimates, which is a premium to the peer industry average of 13.8X. On a trailing cash flow basis, the stock currently trades at 15.6X versus its peer group's average of 5.8X. Additionally, the stock has a PEG ratio of 1.45. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Caterpillar currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Caterpillar passes the test. Thus, it seems as though Caterpillar shares could have a bit more room to run in the near term.
How Does CAT Stack Up to the Competition?
Shares of CAT have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is H&E Equipment Services, Inc. (HEES - Free Report) . HEES has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of A.
Earnings were strong last quarter. H&E Equipment Services, Inc. beat our consensus estimate by 22.09%, and for the current fiscal year, HEES is expected to post earnings of $3.84 per share on revenue of $1.22 billion.
Shares of H&E Equipment Services, Inc. have gained 5.6% over the past month, and currently trade at a forward P/E of 13.77X and a P/CF of 4.83X.
The Manufacturing - Construction and Mining industry is in the top 5% of all the industries we have in our universe, so it looks like there are some nice tailwinds for CAT and HEES, even beyond their own solid fundamental situation.
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Caterpillar Inc. (CAT) Hits Fresh High: Is There Still Room to Run?
Have you been paying attention to shares of Caterpillar (CAT - Free Report) ? Shares have been on the move with the stock up 2% over the past month. The stock hit a new 52-week high of $241.91 in the previous session. Caterpillar has gained 16.9% since the start of the year compared to the -11% move for the Zacks Industrial Products sector and the 16.9% return for the Zacks Manufacturing - Construction and Mining industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 27, 2022, Caterpillar reported EPS of $3.95 versus consensus estimate of $3.19 while it beat the consensus revenue estimate by 4.57%.
For the current fiscal year, Caterpillar is expected to post earnings of $13.85 per share on $58.73 billion in revenues. This represents a 28.12% change in EPS on a 15.23% change in revenues. For the next fiscal year, the company is expected to earn $14.90 per share on $61.54 billion in revenues. This represents a year-over-year change of 7.62% and 4.78%, respectively.
Valuation Metrics
Caterpillar may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Caterpillar has a Value Score of D. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 17.5X current fiscal year EPS estimates, which is a premium to the peer industry average of 13.8X. On a trailing cash flow basis, the stock currently trades at 15.6X versus its peer group's average of 5.8X. Additionally, the stock has a PEG ratio of 1.45. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Caterpillar currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Caterpillar passes the test. Thus, it seems as though Caterpillar shares could have a bit more room to run in the near term.
How Does CAT Stack Up to the Competition?
Shares of CAT have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is H&E Equipment Services, Inc. (HEES - Free Report) . HEES has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of A, and a Momentum Score of A.
Earnings were strong last quarter. H&E Equipment Services, Inc. beat our consensus estimate by 22.09%, and for the current fiscal year, HEES is expected to post earnings of $3.84 per share on revenue of $1.22 billion.
Shares of H&E Equipment Services, Inc. have gained 5.6% over the past month, and currently trade at a forward P/E of 13.77X and a P/CF of 4.83X.
The Manufacturing - Construction and Mining industry is in the top 5% of all the industries we have in our universe, so it looks like there are some nice tailwinds for CAT and HEES, even beyond their own solid fundamental situation.