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Caterpillar (CAT) Stock Flat Ahead of Earnings: What To Expect

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Shares of Caterpillar (CAT - Free Report) shed just two cents during regular hours Friday, the last day of trading before the construction equipment giant releases its latest quarterly earnings report. U.S. stocks were down in general, and Caterpillar fared better than market leaders in the tech sector, but investors displayed some apathy ahead of the earnings announcement.

Caterpillar shares have been beaten down this year, tumbling about 9% since the start of 2018 and falling more than 16% from their January highs. Nevertheless, continued cost-cutting efforts and investments in expanded offerings and services should remain as growth catalysts; plus, strong GDP growth implies solid economic conditions on the domestic front.

It is always important to be paying attention to Dow components like CAT during earnings season, but what should investors expect to see from the company on Monday morning? Let’s take a closer look.

Caterpillar Inc. Price, Consensus and EPS Surprise

Caterpillar Inc. Price, Consensus and EPS Surprise | Caterpillar Inc. Quote

 

Earnings Outlook

Caterpillar will release its Q2 fiscal 2018 results before the market opens on Monday. Here’s what analysts are expecting, according to our Zacks Consensus Estimates:

Earnings: Caterpillar is projected to report adjusted earnings of $2.66 per share, which would represent year-over-year growth of nearly 79%.

Estimate Revisions: Caterpillar has seen one positive revision to its soon-to-be-reported quarter’s EPS estimates within the past 30 days. No negative revisions have taken place in that time period. The Zacks Consensus Estimate now sits a penny higher than where it did about a month ago.

Revenue: Consensus estimates have Caterpillar’s Q2 revenue pegged at $13.77 billion. This would mark growth of about 22% from the prior-year period.

Valuation

CAT is trading at about 12.5x forward 12-month earnings heading into the report. This is essentially in line with its industry’s average—but a noticeable discount compared to the broader market. Over the past year, CAT has traded as high as 24.7x and as low as 11.8x. Its 52-week median earnings multiple is 18.3x.

Bottom Line

Stocks finished the week on a rough note Friday, but Caterpillar has plenty of growth prospects to be excited about in Monday’s report. Plus, the stock is trading near its cheapest valuation in a year, meaning that investors have a chance to get in on the low ahead of earnings.

This might reduce risk and make CAT an interesting earnings play for some. Still, the stock has just a Zacks Rank #3 (Hold), and Friday’s trading suggests plenty of investors are opting to sit things out for now.

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