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Bear of the Day

Caterpillar (CAT - Analyst Report) it certainly hasn't been "The Year of the Cat" and even Al Stewart would tell you that being down 3% YTD is no good in 2013. To make matters worse, Caterpillar is the Bear of the Day as a Zacks Rank #5 (Strong Sell).

Dividend Coming Up

While the Zacks Rank is focused on earnings estimates and what direction they are headed, investors would be amiss if they didn't notice that CAT is headed for another dividend payment. The stock is yielding 2.77% according to Google Finance, and paid a dividend of $0.52 last year on December 20. The quarterly dividend was increased to $0.60 for the July 2013 dividend.

Company Description

Caterpillar sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. The company was founded in 1925 and is headquartered in Peoria, Illinois.

Earnings History

Over the last year, CAR has missed the Zacks Consensus Estimate in all four quarters. The misses of 22 cents, 3 cents, 26 cent and 23 cents followed 5 consecutive beats. In only two of the four recent earnings misses has the stock fallen.

In each of those misses the company has reported revenues that were below the Zacks Revenue Consensus. The interesting thing is that the analysts have remained positive throughout the year, but the size of the misses has been increasing. The misses have ranged from $30M four quarters ago to a miss of $1.151B in the most recent quarter. The most recent miss was the largest of the four quarters.

Earnings Estimates Adjusted

In May the Zacks Consensus Estimate for 2013 was calling for $6.90. The number has since dropped to $1.40 and now stands at $5.50.

2014 isn't seeing any increases either. The Zacks Consensus Estimate has slipped from $8.05 in May to $7.28 in August and now stands at $5.77.

Valuation

The decrease in price has made the valuation look pretty attractive for CAT. The 15.7x forward PE compares favorably to the 16.3x industry average. The problem is that as the stock price continues to fall and that has a way of making all the valuation metrics look better and better. With estimates continuing to fall, it is likely that this trend will continue.

The Chart

The price and consensus chart for CAT doesn't show a big pull down in price as estimates have come in. Still, investors would be wise to wait for the estimates to move higher before starting a position in CAT.

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.

Brian is also the editor of Breakout Growth Trader a trading service that focuses on small cap stocks and also carries a risk limiting strategy. Subscribers get daily emails along with buy, and sell alerts.

Follow Brian Bolan on twitter at @BBolan1

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