We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Reasons to Add Caterpillar (CAT) Stock to Your Portfolio
Read MoreHide Full Article
Caterpillar Inc. (CAT) has been delivering growth in its top and bottom lines for nine straight quarters despite inflationary pressures and supply-chain snarls that have been plaguing the industry at large. The outperformance was aided by improving demand in CAT’s end markets and cost-control efforts. A strong liquidity position and the company’s ongoing investments in its expanded offerings, services and digital initiatives are expected to contribute to growth.
Let’s delve deeper and analyze the factors that make this Zacks Rank #1 (Strong Buy) stock a strong investment option at the moment.
Solid Q1 Results & Robust Backlog Levels: Caterpillar’s adjusted earnings per share were $4.91 in first-quarter 2023, which marked a 70.5% year-over-year improvement. Strong demand across most of its end markets and a favorable price realization led to improved earnings despite unfavorable manufacturing costs in the quarter. The backlog at the end of the quarter was an impressive $30.4 billion. This bodes well for CAT’s top-line performance in the days ahead.
Positive Earnings Surprise History: Caterpillar’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 14.3%.
Upbeat Growth Projections: An uptrend in the Zacks Consensus Estimate for the company echoes a positive sentiment. The consensus estimate for 2023 earnings has moved 12% upward over the past 30 days and is pegged at $17.61 per share. It suggests growth of 27.2% from the year-ago reported figure.
The consensus mark for fiscal 2024 earnings stands at $17.96 per share, indicating a year-over-year improvement of 2%. The Zacks Consensus Estimate has moved up 8% over the past 30 days.
CAT has an estimated long-term earnings growth rate of 12%.
Solid Demand to Aid Top-Line Growth
In North America, demand in the residential and non-residential construction sectors is likely to bolster demand for Caterpillar’s construction equipment. The perked-up investment in roads, bridges, airports and waterways as a result of the U.S. Infrastructure Investment and Jobs Act represents a huge opportunity for CAT.
In the Asia Pacific (barring China) region, higher commodity prices, housing strength and increased government spending on infrastructure will support construction equipment sales. Increased construction activity will drive machine demand in EAME and Latin America.
In Resource Industries, mining orders are on an uptrend, auguring well for the Resource Industries segment. Miners are increasingly relying on autonomous systems to enhance productivity and reduce costs and emissions. Therefore, Caterpillar is enhancing its autonomous capabilities and bringing innovative products to the market. In the Energy & Transportation segment, strong order rates in most applications are expected to support revenues.
Strong Balance Sheet
CAT’s cash and liquidity position remains strong, with the company generating an operating cash flow of $1.4 billion in the first quarter of 2023. It ended the quarter with cash and short-term investments of $6.8 billion. Machinery, Energy & Transportation (ME&T) debt stood at $9.6 billion. Compared to the base of 4.5 in 2017, its times interest earned ratio has improved substantially over the years and is currently at 9.2.
CAT continues to maintain its status as a dividend aristocrat, having continued its streak of paying higher dividends to its shareholders for 29 straight years. CAT’s dividend yield and payout ratio are higher than its peers. Over the past four years, the company has returned an average of 99% of its ME&T free cash flow to its shareholders, in sync with its target of returning all its ME&T free cash flow to its shareholders over time.
Growth Strategies in Place
Caterpillar continues to focus on customers steadily investing in digital capabilities, connecting assets and job sites, and developing next-generation productive and efficient products. CAT is consistently investing in expanding its offerings and services, and digital initiatives like e-commerce to drive long-term growth.
Price Performance
Shares of Caterpillar have gained 4.2% in the past year, compared with the industry’s 4.6% growth.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved north by 17.7% in the past 60 days. Shares of WOR have gained 33.5% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. Shares of MTW have rallied 29.1% in the last year.
The Zacks Consensus Estimate for AptarGroup’s 2023 earnings per share is pegged at $4.15. The consensus estimate for 2023 earnings rose 8% in the last 60 days. ATR has a trailing four-quarter average earnings surprise of 6.4%. Shares of ATR have gained 13.4% in the last year.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Reasons to Add Caterpillar (CAT) Stock to Your Portfolio
Caterpillar Inc. (CAT) has been delivering growth in its top and bottom lines for nine straight quarters despite inflationary pressures and supply-chain snarls that have been plaguing the industry at large. The outperformance was aided by improving demand in CAT’s end markets and cost-control efforts. A strong liquidity position and the company’s ongoing investments in its expanded offerings, services and digital initiatives are expected to contribute to growth.
Let’s delve deeper and analyze the factors that make this Zacks Rank #1 (Strong Buy) stock a strong investment option at the moment.
Solid Q1 Results & Robust Backlog Levels: Caterpillar’s adjusted earnings per share were $4.91 in first-quarter 2023, which marked a 70.5% year-over-year improvement. Strong demand across most of its end markets and a favorable price realization led to improved earnings despite unfavorable manufacturing costs in the quarter. The backlog at the end of the quarter was an impressive $30.4 billion. This bodes well for CAT’s top-line performance in the days ahead.
Positive Earnings Surprise History: Caterpillar’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 14.3%.
Upbeat Growth Projections: An uptrend in the Zacks Consensus Estimate for the company echoes a positive sentiment. The consensus estimate for 2023 earnings has moved 12% upward over the past 30 days and is pegged at $17.61 per share. It suggests growth of 27.2% from the year-ago reported figure.
The consensus mark for fiscal 2024 earnings stands at $17.96 per share, indicating a year-over-year improvement of 2%. The Zacks Consensus Estimate has moved up 8% over the past 30 days.
CAT has an estimated long-term earnings growth rate of 12%.
Solid Demand to Aid Top-Line Growth
In North America, demand in the residential and non-residential construction sectors is likely to bolster demand for Caterpillar’s construction equipment. The perked-up investment in roads, bridges, airports and waterways as a result of the U.S. Infrastructure Investment and Jobs Act represents a huge opportunity for CAT.
In the Asia Pacific (barring China) region, higher commodity prices, housing strength and increased government spending on infrastructure will support construction equipment sales. Increased construction activity will drive machine demand in EAME and Latin America.
In Resource Industries, mining orders are on an uptrend, auguring well for the Resource Industries segment. Miners are increasingly relying on autonomous systems to enhance productivity and reduce costs and emissions. Therefore, Caterpillar is enhancing its autonomous capabilities and bringing innovative products to the market. In the Energy & Transportation segment, strong order rates in most applications are expected to support revenues.
Strong Balance Sheet
CAT’s cash and liquidity position remains strong, with the company generating an operating cash flow of $1.4 billion in the first quarter of 2023. It ended the quarter with cash and short-term investments of $6.8 billion. Machinery, Energy & Transportation (ME&T) debt stood at $9.6 billion. Compared to the base of 4.5 in 2017, its times interest earned ratio has improved substantially over the years and is currently at 9.2.
CAT continues to maintain its status as a dividend aristocrat, having continued its streak of paying higher dividends to its shareholders for 29 straight years. CAT’s dividend yield and payout ratio are higher than its peers. Over the past four years, the company has returned an average of 99% of its ME&T free cash flow to its shareholders, in sync with its target of returning all its ME&T free cash flow to its shareholders over time.
Growth Strategies in Place
Caterpillar continues to focus on customers steadily investing in digital capabilities, connecting assets and job sites, and developing next-generation productive and efficient products. CAT is consistently investing in expanding its offerings and services, and digital initiatives like e-commerce to drive long-term growth.
Price Performance
Shares of Caterpillar have gained 4.2% in the past year, compared with the industry’s 4.6% growth.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. (WOR - Free Report) , The Manitowoc Company, Inc. (MTW - Free Report) and AptarGroup, Inc. (ATR - Free Report) . Currently, WOR and MTW sport a Zacks Rank of 1, while ATR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved north by 17.7% in the past 60 days. Shares of WOR have gained 33.5% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. Shares of MTW have rallied 29.1% in the last year.
The Zacks Consensus Estimate for AptarGroup’s 2023 earnings per share is pegged at $4.15. The consensus estimate for 2023 earnings rose 8% in the last 60 days. ATR has a trailing four-quarter average earnings surprise of 6.4%. Shares of ATR have gained 13.4% in the last year.