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Reasons to Hold Caterpillar (CAT) Stock in Your Portfolio Now
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Caterpillar Inc. (CAT - Free Report) has been benefiting from improving demand in its end markets and cost-control efforts, which are reflected in its 13-quarter stint of earnings growth. This is impressive considering the inflationary pressures and supply-chain snarls faced by the company as well as the industry at large through this period.
CAT’s solid backlog and upbeat outlook for its segments position it well for improved results. The company’s ongoing investments in expanding its offerings and services as well as in digital initiatives are expected to contribute to growth.
Caterpillar currently carries a Zacks Rank #3 (Hold).
Shares of Caterpillar have gained 61.1% in the past year compared with the industry’s 56.8% growth. The Zacks Industrial Products sector has gained 25% and the S&P 500 composite has risen 25.3% in the same time frame.
Image Source: Zacks Investment Research
Record Q1 Earnings: Caterpillar reported adjusted record earnings per share of $5.60 in the first quarter. The bottom line marked a 14% year-over-year improvement, which was attributed to favorable price realization and manufacturing costs, largely reflecting lower freight and improved performance in the Energy & Transportation segment.
Robust Backlog Levels: CAT’s backlog at the end of the quarter was a healthy $27.9 billion. This bodes well for its top-line performance in the quarters ahead.
Positive Earnings Surprise History: Caterpillar has an average earnings surprise of 14.6% in the trailing four quarters.
Upbeat Growth Projections: The Zacks Consensus Estimate for 2024 earnings is pegged at $21.81 per share, which suggests growth of 2.8% from the year-ago reported figure. The consensus mark for fiscal 2025 earnings is $23.16 per share, indicating a year-over-year improvement of 6.2%.
The estimates for 2024 and 2025 earnings have moved up 3% and 2%, respectively, over the past 30 days.
CAT has an estimated long-term earnings growth rate of 8.9%.
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 stepped-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
Caterpillar's cash and liquidity position remains strong, which enables it to invest in growth while returning cash to shareholders. The company generated an operating cash flow of $2.1 billion in the first quarter and ended the quarter with cash and cash equivalents of around $5 billion. It also has $2.2 billion in liquid marketable securities.
ME&T debt was $9.6 billion as of Mar 31, lower than $9.7 billion in 2023-end. Compared with the base of 4.6 in 2020, its times interest earned ratio has improved substantially over the years and is currently 9.5.
Caterpillar’s board of directors had approved an 8% hike in the quarterly dividend in 2023. The company returned a record $5.1 billion to shareholders in the first quarter through dividends and share repurchases. It paid higher dividends to shareholders for 30 straight years and is a member of the S&P 500 Dividend Aristocrat Index.
CAT's 1.54% dividend yield is higher than the sector’s yield of 1.46% and the S&P500’s 1.28%. The company has a five-year dividend growth rate of 6.8% and a payout ratio of 23.7%, higher than its industry peers. Over the past four years, it has returned an average of 99% of its ME&T free cash flow to shareholders, which is in sync with its target to return its full ME&T free cash flow to shareholders over time. The company expects free cash flow in 2024 to be in the top half of the range of $5-$10 billion, backed by healthy customer demand and strong operating performance.
Growth Strategies in Place
Caterpillar continues to focus on customers and the future by 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, as well as digital initiatives like e-commerce, to drive long-term growth.
The Zacks Consensus Estimate for Intellicheck’s 2024 earnings is pegged at 2 cents per share. The consensus estimate for 2024 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 28.9%. IDN shares have gained 18.2% in the past year.
Applied Industrial has an average trailing four-quarter earnings surprise of 8.2%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.62 per share, which indicates year-over-year growth of 9.9%. Estimates have moved 2% north in the past 60 days. The company’s shares have gained 48.8% in the past year.
The Zacks Consensus Estimate for ACCO Brands’ 2024 earnings is pegged at $1.07 per share. The consensus estimate for 2024 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 25.9%. ACCO shares have gained 3.7% in the past year.
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Reasons to Hold Caterpillar (CAT) Stock in Your Portfolio Now
Caterpillar Inc. (CAT - Free Report) has been benefiting from improving demand in its end markets and cost-control efforts, which are reflected in its 13-quarter stint of earnings growth. This is impressive considering the inflationary pressures and supply-chain snarls faced by the company as well as the industry at large through this period.
CAT’s solid backlog and upbeat outlook for its segments position it well for improved results. The company’s ongoing investments in expanding its offerings and services as well as in digital initiatives are expected to contribute to growth.
Caterpillar currently carries a Zacks Rank #3 (Hold).
Shares of Caterpillar have gained 61.1% in the past year compared with the industry’s 56.8% growth. The Zacks Industrial Products sector has gained 25% and the S&P 500 composite has risen 25.3% in the same time frame.
Image Source: Zacks Investment Research
Record Q1 Earnings: Caterpillar reported adjusted record earnings per share of $5.60 in the first quarter. The bottom line marked a 14% year-over-year improvement, which was attributed to favorable price realization and manufacturing costs, largely reflecting lower freight and improved performance in the Energy & Transportation segment.
Robust Backlog Levels: CAT’s backlog at the end of the quarter was a healthy $27.9 billion. This bodes well for its top-line performance in the quarters ahead.
Positive Earnings Surprise History: Caterpillar has an average earnings surprise of 14.6% in the trailing four quarters.
Upbeat Growth Projections: The Zacks Consensus Estimate for 2024 earnings is pegged at $21.81 per share, which suggests growth of 2.8% from the year-ago reported figure. The consensus mark for fiscal 2025 earnings is $23.16 per share, indicating a year-over-year improvement of 6.2%.
The estimates for 2024 and 2025 earnings have moved up 3% and 2%, respectively, over the past 30 days.
CAT has an estimated long-term earnings growth rate of 8.9%.
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 stepped-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
Caterpillar's cash and liquidity position remains strong, which enables it to invest in growth while returning cash to shareholders. The company generated an operating cash flow of $2.1 billion in the first quarter and ended the quarter with cash and cash equivalents of around $5 billion. It also has $2.2 billion in liquid marketable securities.
ME&T debt was $9.6 billion as of Mar 31, lower than $9.7 billion in 2023-end. Compared with the base of 4.6 in 2020, its times interest earned ratio has improved substantially over the years and is currently 9.5.
Caterpillar’s board of directors had approved an 8% hike in the quarterly dividend in 2023. The company returned a record $5.1 billion to shareholders in the first quarter through dividends and share repurchases. It paid higher dividends to shareholders for 30 straight years and is a member of the S&P 500 Dividend Aristocrat Index.
CAT's 1.54% dividend yield is higher than the sector’s yield of 1.46% and the S&P500’s 1.28%. The company has a five-year dividend growth rate of 6.8% and a payout ratio of 23.7%, higher than its industry peers. Over the past four years, it has returned an average of 99% of its ME&T free cash flow to shareholders, which is in sync with its target to return its full ME&T free cash flow to shareholders over time. The company expects free cash flow in 2024 to be in the top half of the range of $5-$10 billion, backed by healthy customer demand and strong operating performance.
Growth Strategies in Place
Caterpillar continues to focus on customers and the future by 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, as well as digital initiatives like e-commerce, to drive long-term growth.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Intellicheck, Inc. (IDN - Free Report) , Applied Industrial Technologies (AIT - Free Report) and ACCO Brands Corporation (ACCO - Free Report) . IDN currently sports a Zacks Rank #1 (Strong Buy), and AIT and ACCO carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Intellicheck’s 2024 earnings is pegged at 2 cents per share. The consensus estimate for 2024 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 28.9%. IDN shares have gained 18.2% in the past year.
Applied Industrial has an average trailing four-quarter earnings surprise of 8.2%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.62 per share, which indicates year-over-year growth of 9.9%. Estimates have moved 2% north in the past 60 days. The company’s shares have gained 48.8% in the past year.
The Zacks Consensus Estimate for ACCO Brands’ 2024 earnings is pegged at $1.07 per share. The consensus estimate for 2024 earnings has been unchanged in the past 60 days. The company has a trailing four-quarter average earnings surprise of 25.9%. ACCO shares have gained 3.7% in the past year.