Back to top

Analyst Blog

Caterpillar Inc. (CAT - Analyst Report) shares attained a 52-week high of $96.68 during intraday trading on Feb 14, finally closing lower at $96.55. Caterpillar had touched this level exactly a year back on Feb 14, 2013.

The company has delivered a year-to-date return of about 7%, outperforming the S&P return of a negative 0.26%. Caterpillar has a market cap of $61.5 billion. Average volume of shares traded over the last three months was approximately 5,944K. Caterpillar has long-term estimated earnings per share growth rate of 8.5%.

What’s Driving Caterpillar?

After a dismal run in 2013, it has been a good year for the mining and equipment behemoth so far, as it gained 12% since reporting its fourth quarter earnings on Jan 27. The share price further found support as news of renewed investments in Northern Ireland and share repurchases came in.

Caterpillar’s fourth quarter results were phenomenal as it marked the first year-over-year earnings improvement in 2013 and broke the jinx of four consecutive negative earnings surprises. Even though revenues declined 10% in the quarter to $14.4 billion, Caterpillar delivered a 48% rise in its earnings to $1.54 per share helped by its focus on cost reduction. Despite a tumultuous year, Caterpillar continued to deliver strong cash flow and reward shareholders though dividend hikes and share repurchases.

Caterpillar expects revenues in 2014 to be flat with 2013 levels, up or down 5%. Excluding restructuring costs, earnings per share are expected at $5.85. Construction Industries and Power Systems are expected to deliver sales growth on the back of economic growth. However, sales in Resource Industries will continue to be challenging, as mining companies keep cutting their pockets with lower capital expenditures planned for 2014.

Caterpillar is all set to reap the benefits of its cost reduction activities, namely, shifting production between certain facilities, rationalization of its smaller facilities and workforce reductions. Also, improving economic conditions, especially in China, and recovery in the construction sector could be catalysts for Caterpillar.

Other Stocks to Consider

Caterpillar currently retains a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include The Manitowoc Company, Inc. (MTW - Analyst Report), Terex Corp. (TEX - Analyst Report) and Zebra Technologies Corp. (ZBRA - Snapshot Report). While Manitowoc carries a Zacks Rank #1 (Strong Buy), Terex and Zebra Technologies hold a Zacks Rank #2 (Buy).