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Caterpillar (CAT) Downgraded to Sell: Should You Dump?
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On Mar 29, Zacks Investment Research downgraded Caterpillar Inc. (CAT - Free Report) to a Zacks Rank #4 (Sell).
Key Factors
Caterpillar is currently facing a probe regarding, among other things, export filings that relate to business with its Swiss subsidiary, CSARL. If the allegations against Caterpillar are proven true, this could have a substantial impact on the company. Further, it could be restricted from bidding for federal contracts, which would be a big blow given that Caterpillar is touted to be one of the biggest beneficiaries from the infrastructure spending promised by President Trump.
Moreover, Caterpillar’s monthly sales have declined 15% in 2016 due to weak mining spending as a result of lower commodity prices. Despite the meager 1% drop reported in Feb 2017, growth still remains in the negative territory. The company is going through a rough patch with sales declining for 51 consecutive months. While commodity prices have improved lately, it is not sufficient to drive a relevant increase in short-term demand for new equipment. As prevalent in recent years, mining customers continue to focus on improving productivity in existing mines and reducing total capital expenditures. The company expects miners’ capital spending to be about flat in 2017.
Given the challenging economic environment and the strengthening of the U.S. dollar, Caterpillar estimates revenues around $36–$39 billion in fiscal 2017. The mid-point of the range depicts a 3% decline from the revenues reported in fiscal 2016. The company anticipates earnings per share (excluding restructuring costs) of $2.90 in fiscal 2017. This reflects a 15% drop for 2017 earnings.
Stock Price Movement
We note that Caterpillar has outperformed the Zacks categorized Machinery – Construction/ Mining sub industry in the last six months. While the stock increased 6.5%, the industry has gained 5.6%. The upside can be attributed to the company’s continued focus to cut down costs in the wake of low demand. However, the negative outcome of the current tax probe loss will hurt the momentum going ahead.
Stocks to Consider
Some better-ranked stocks worth considering in the broader sector include ACCO Brands Corporation (ACCO - Free Report) , Parker-Hannifin Corporation (PH - Free Report) and Brady Corporation (BRC - Free Report) . ACCO Brands has an average positive earnings surprise of 24.74% in the past four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Parker-Hannifin Corporation has delivered an average positive earnings surprise of 12.44% in the past four quarters and flaunts a Zacks Rank #1. Brady Corporation, a Zacks Rank #2 (Buy) stock has an average positive earnings surprise of 20.84% in the same time frame.
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Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
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Caterpillar (CAT) Downgraded to Sell: Should You Dump?
On Mar 29, Zacks Investment Research downgraded Caterpillar Inc. (CAT - Free Report) to a Zacks Rank #4 (Sell).
Key Factors
Caterpillar is currently facing a probe regarding, among other things, export filings that relate to business with its Swiss subsidiary, CSARL. If the allegations against Caterpillar are proven true, this could have a substantial impact on the company. Further, it could be restricted from bidding for federal contracts, which would be a big blow given that Caterpillar is touted to be one of the biggest beneficiaries from the infrastructure spending promised by President Trump.
Caterpillar, Inc. Price and Consensus
Caterpillar, Inc. Price and Consensus | Caterpillar, Inc. Quote
Moreover, Caterpillar’s monthly sales have declined 15% in 2016 due to weak mining spending as a result of lower commodity prices. Despite the meager 1% drop reported in Feb 2017, growth still remains in the negative territory. The company is going through a rough patch with sales declining for 51 consecutive months. While commodity prices have improved lately, it is not sufficient to drive a relevant increase in short-term demand for new equipment. As prevalent in recent years, mining customers continue to focus on improving productivity in existing mines and reducing total capital expenditures. The company expects miners’ capital spending to be about flat in 2017.
Given the challenging economic environment and the strengthening of the U.S. dollar, Caterpillar estimates revenues around $36–$39 billion in fiscal 2017. The mid-point of the range depicts a 3% decline from the revenues reported in fiscal 2016. The company anticipates earnings per share (excluding restructuring costs) of $2.90 in fiscal 2017. This reflects a 15% drop for 2017 earnings.
Stock Price Movement
We note that Caterpillar has outperformed the Zacks categorized Machinery – Construction/ Mining sub industry in the last six months. While the stock increased 6.5%, the industry has gained 5.6%. The upside can be attributed to the company’s continued focus to cut down costs in the wake of low demand. However, the negative outcome of the current tax probe loss will hurt the momentum going ahead.
Stocks to Consider
Some better-ranked stocks worth considering in the broader sector include ACCO Brands Corporation (ACCO - Free Report) , Parker-Hannifin Corporation (PH - Free Report) and Brady Corporation (BRC - Free Report) . ACCO Brands has an average positive earnings surprise of 24.74% in the past four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Parker-Hannifin Corporation has delivered an average positive earnings surprise of 12.44% in the past four quarters and flaunts a Zacks Rank #1. Brady Corporation, a Zacks Rank #2 (Buy) stock has an average positive earnings surprise of 20.84% in the same time frame.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>