Headquartered in Deerfield, IL,
Caterpillar ( CAT - Free Report) is the world's largest heavy-machinery maker and seen as a bellwether for global economic activity.
The company has benefitted a lot from improving global growth and a weak dollar since it derives more than half its sales from international markets.
Caterpillar reported another strong quarter with adjusted earnings per share surging 129% year over year. Earnings also beat the Zacks Consensus Estimate of $1.22 by 60%. Revenues improved 24.6% year over year to $11.4 billion in the quarter, surpassing the Zacks Consensus Estimate of $10.6 billion.
Better-than-expected performance resulted from strong demand for its construction equipment as well as cost-control efforts. Sales increased across all regions, with largest increase in North America, while China sales remained strong.
The management also raised its revenue and earnings guidance for the year.
Rising Earnings Estimates
Analysts have raised their estimates for the company after excellent earnings. The Zacks Consensus Estimate for the current and the next fiscal year have increased to $6.40 per share and $7.63 per share from $5.26 and $6.74, before the results.
The company has been beating estimates consistently over the past few quarters. The average positive surprise for the past four quarters is 53.1%.
The Bottom Line
In addition to a Zacks Rank #1 (Strong Buy), Zacks Industry rank of 8 out of 265 (top 3%) greatly increases the likelihood of short-to-mid- term outperformance. The stock also has a juicy dividend yield of 2.3%.
The company had to struggle with sluggish demand for many years, but with economic growth picking up in most parts of the world, their outlook has improved substantially.
Earlier this year, the IMF had raised their growth expectations for the Eurozone and emerging markets including China. And while the timing of Trump’s $1 trillion infrastructure spending plan remains uncertain, Caterpillar is expected to be a big winner from it.
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