Caterpillar (CAT) earnings preview: strong double-digit growth

12:12 pm ET, 27 Jul 2018

Caterpillar, Inc. (CAT) is expected to report earnings on July 30 before market open. The report will be for the fiscal quarter ending June 2018. Shares are trading at 138.24, up 1.3%.

What are CAT earnings expectations?  What should you know about the company prior to the earnings?

Caterpillar has carefully assembled its brand and product portfolio over the past 100 years to create the largest construction and mining equipment manufacturer in the world. In a push to realize research and development and production efficiencies, Caterpillar has become the largest or second-largest manufacturer of virtually every product it makes while generating a double-digit return on invested capital.

While the company has entered new geographies organically, acquisitions have helped it create a robust product line. Typically, larger and higher-priced equipment is completely designed and manufactured in-house at Caterpillar, while smaller and lower-priced equipment is largely assembled from premanufactured components from various suppliers. Over the past decade, Caterpillar has increased its adoption of lean manufacturing principles, particularly with new hires from the automotive industry.

Caterpillar increased manufacturing segment revenue 33% to $12.2 billion compared with the prior year’s quarter. The industry has been in growth mode thanks to a combination of U.S. tax reform, strong economic activity, and positive commodity price trends. Caterpillar’s resource industries and energy and transportation segments clearly demonstrate this point, as both segments increased revenue 32% to $2.2 billion, and 27% to $4.3 billion, respectively. 

Resource industries improved margins around 760 basis points to 17.1%, and energy and transportation improved margins around 400 basis points to 20.4%, with the latter’s margins not seen since the first quarter of 2015. Also taking advantage of the positive industry tailwinds, construction industries increased revenue 38% to $5.7 billion thanks to strong dealer restocking inventory activity ahead of the spring selling season.

Caterpillar Inc. has a history of beating analysts’ earnings estimates. In the past four quarters, the company: 

  • Beat analyst EPS estimates by 23 cents ($1.49 actuals vs. $1.26 forecast) in FQ2’17;
  • Beat analyst EPS estimates by 73 cents ($1.95 actuals vs. $1.22 forecast) in FQ3’17;
  • Beat analyst EPS estimates by 39 cents ($2.16 actuals vs. $1.77 forecast) in FQ4’17;
  • Beat analyst EPS estimates by 71 cents ($2.82 actuals vs. $2.11 forecast) in FQ1’18.

For FQ2’18, EPS is expected to grow by 79% year-over-year to $2.66, while revenue is expected to grow 22% year-over-year to $13.77 billion.

Over the last month, Caterpillar, Inc. (CAT) returned -1.21%.

Caterpillar, Inc. (CAT) average analyst price target ($174.79) is 26.44% above its current price ($138.24).

For the latest price and information on Caterpillar, Inc., please visit Finstead and search for "CAT price" or "CAT news".

Caterpillar, Inc. (CAT) Stock Guide

Updated at: 1:24 pm ET, 17 Sep 2020

Before we start: if you're looking for CAT stock price, you can quickly find it out by visiting Finny and typing "CAT quote". If you're looking for a quick scoop on CAT stock (chart, price target, market cap, news and buy or sell analysis), go to Finny and look for "CAT". You'll get all this info in one place. Or you can just type "CAT news" to get the latest stock news.

Looking to buy or sell Caterpillar, Inc. (CAT)? Interested in getting the full scoop on CAT, including earnings and dividends, stock forecast, buy or sell analysis and key stats? If so, you came to the right place.

In this CAT stock guide, we'll address key questions about CAT, above and beyond what you can find on Yahoo Finance, Zacks, MarketWatch or Morningstar.

Here is what you'll be able to find in this guide:

Earnings and Dividends: earnings, earnings date, dividend rate and dividend yield;
Analyst Predictions: stock forecast and analyst ratings;
Analysis: Finny Score and buy or sell analysis;
Key Stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio, industry, sector, and number of employees.

And here is the list of questions we'll answer:
1. What are CAT earnings?
2. What is CAT dividend?
3. What is CAT dividend yield?
4. What is CAT stock forecast (i.e., prediction)?
5. CAT buy or sell? What is CAT Finny Score?
6. What are the reasons to buy CAT? Why should I buy CAT stock?
7. What are the reasons to sell CAT? Why should I sell CAT stock?
8. What are CAT key stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

So let's start. Scroll down to the question that interests you the most.

Earnings and Dividends

1. What are CAT earnings?

CAT trailing 12-month earnings per share (EPS) is $7.49.

2. What is CAT dividend?

CAT forward dividend is $4.12.

3. What is CAT dividend yield?

CAT forward dividend yield is 2.9%.

Analyst Predictions

4. What is CAT stock forecast (i.e., prediction)?

Based on CAT analyst price targets, CAT stock forecast is $142.90 (for a year from now). That means the average analyst price target for CAT stock is $142.90. The prediction is based on 24 analyst estimates.

The low price target for CAT is $101.00, while the high price target is $169.00.

CAT analyst rating is Buy.

Analysis

5. CAT buy or sell? What is CAT Finny Score?

#{finnyScore:40}Our quantitative analysis shows 4 reasons to buy and 6 reasons to sell CAT, resulting in Finny Score of 40.

6. What are the reasons to buy CAT? Why should I buy CAT stock?

Here are the reasons to buy CAT stock:

  • Operators of Caterpillar's equipment appreciate the company's extensive dealer network and its ability to maximize uptime on construction and mining equipment.
  • The company will continue to restructure its supply chain to reduce its break-even manufacturing levels and push more production risk to its suppliers.
  • Caterpillar’s North American construction business continues to benefit from an equipment upgrade cycle from its customers.
  • Caterpillar expects growth in Construction Industries in 2018, with some moderation in the latter part of the year. After a strong first half, China will be a drag, due to anticipated seasonality of sales. Most other APAC countries are expected to grow, attributed to investments in infrastructure.
  • Caterpillar reported a 33% rise in global retail sales for the three months ended February 2018, with improvement noted across all regions. Within Machines, Resource Industries and Construction Industries reported positive gains for the eighth and 13th consecutive months, respectively. Energy & Transportation’s retail sales improved for the sixth consecutive month.
  • Caterpillar’s cash and liquidity position remains strong with the company ending 2017 with cash and short-term investments of $8.3 billion. Debt-to-capital ratio at ME&T was 36.7% within its targeted range of 30-45% and lower than 41% at 2016-end. ME&T operating cash flow for 2017 was $5.5 billion, up from $3.9 billion in 2016.
  • In September 2015, Caterpillar set out with significant restructuring and cost reduction initiative, with actions expected through 2018. Once fully implemented, the plan would lower its annual operating costs by about $1.5 billion. This includes the consolidation or closure of more than 30 facilities and reduction of workforce by more than 16,000.
  • CAT profitability is improving. The YoY profit margin change was 9.57 percentage points. See CAT profitability chart.
  • CAT forward dividend yield is 2.90%, higher than the industry (0.76%) and sector (0.49%) forward dividend yields. See CAT forward dividend chart.
  • CAT average analyst rating is Buy. See CAT analyst rating chart.
  • CAT cash to debt ratio is 0.21, higher than the average industry (0.17) and sector (0.12) cash to debt ratio. See CAT cash to debt chart.

7. What are the reasons to sell CAT? Why should I sell CAT stock?

Let's look at the reasons to sell CAT stock (i.e., the bear case):

  • Caterpillar has a significant global market share position, but it trails Komatsu's share in the large Chinese market.
  • A decision to write off 80% of the value of the ERA Mining Machinery acquisition due to inflated receivables and accounting irregularities raises some concerns about Caterpillar's ability to successfully conduct international acquisitions.
  • The company is more leveraged toward coal mining than natural gas extraction. A push to limit coal consumption in the U.S. and China (the two largest coal consumers in the world) is a net negative headwind for the company.
  • In Construction Industries, growth will moderate in the back half of 2018 mainly due to the impact of seasonal sales in China.
  • The Financial Products segment’s profit is expected to be lower in 2018 than in 2017, primarily due to the absence of about $100 million of gains on sales of securities in 2017.
  • Caterpillar is currently facing investigation by the U.S. government that has included search warrant activity at three locations in Peoria, IL. At this point, potential penalties and/or fines have not been announced by the government, and the company indicated it is cooperating fully with the authorities and intends to comply with the law. If it is found guilty, it will be a blow to its reputation.
  • For the past several years, Caterpillar has incurred substantial restructuring costs as a result of actions to lower cost structure in response to weak economic conditions. During 2016, the company incurred $1.019 billion of restructuring costs while in 2017, restructuring costs were to the tune of $1.256 billion. In 2018, the company anticipates about $400 million of restructuring costs.
  • The rates of infrastructure spending, housing starts and commercial construction play a significant role in Caterpillar’s results. If these activities decrease from current levels, demand for Caterpillar’s products may be significantly impacted, which could hurt results. Further, the company is experiencing issues related to supply chain ability to ramp production.
  • CAT stock price ($155.07) is at the 52-week high. Perhaps now is a good time to sell? See CAT price chart.
  • CAT quarterly revenue growth was -30.70%, lower than the industry and sector average revenue growth (0.38% and 1.01%, respectively). See CAT revenue growth chart.
  • CAT Price/Book ratio is 5.76, which is high compared to its industry peers’ P/B ratios. See CAT forward Price/Book ratio chart.
  • CAT Price/Sales ratio is 1.70, which is high compared to its industry peers’ P/S ratios. See CAT forward Price/Sales ratio chart.
  • CAT average analyst price target ($142.90) is below its current price ($155.07). See CAT price target chart.
  • CAT Enterprise Value/Revenue multiple is 2.31, which is high compared to its industry peers’ Enterprise Value/Revenue multiples. See CAT Enterprise Value/Revenue chart.

Key Stats

8. What are CAT key stats : revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

Let's look at the key statistics for CAT:

Metrics CAT
Price $146.05
Average Price Target / Upside $142.90 / -2.16%
Average Analyst Rating Hold
Forward Dividend Yield 2.90%
Industry Farm & Construction Equipment
Sector Industrials
Number of Employees 113,560
Market Cap $79.09B
Forward P/E Ratio 20.14
Price/Book Ratio 1.7
Revenue (TTM) $46.53B
YoY Quarterly Revenue Growth -30.70%
Profit Margin 8.90%

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