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Caterpillar (CAT) to Post Q4 Earnings: What's in Store?
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Caterpillar Inc. (CAT - Free Report) is likely to register an improvement in both the top and the bottom lines when it reports fourth-quarter 2022 results on Jan 31, before the opening bell. Strong demand in its end markets and pricing actions are expected to have negated the impact of inflated costs and supply-chain disruptions, driving the improvement in the quarterly results.
The Zacks Consensus Estimate for quarterly earnings per share for Caterpillar is currently pegged at $3.95, which indicates growth of 47% from the year-ago reported figure. The consensus mark for total sales stands at $15.9 billion, suggesting growth of 15.2% from the prior-year quarter.
Q3 Results & Surprise History
In the last reported quarter, Caterpillar delivered improved year-over-year performance in its revenues and earnings and also beat the respective Zacks Consensus Estimate.
With the earnings beat in the last quarter, the mining and construction equipment behemoth maintained the streak of surpassing earnings estimates for ten consecutive quarters. CAT has a trailing four-quarter earnings surprise of 14.7%, on average.
Per the Federal Reserve, total industrial production rose at an annual rate of 1.7% in the October-December quarter. These figures indicate that Caterpillar might have witnessed an increase in order levels in the quarter. This, along with the solid backlog of $30 billion reported at the end of the third quarter of 2022, are expected to get reflected in Caterpillar’s third-quarter top line. Also, the fourth quarter of the year is historically the strongest quarter in terms of sales due to seasonal factors, and the fourth quarter of 2022 was no exception.
Supply-chain headwinds, labor constraints currently faced by the industry and inflated costs for raw materials and freight services are likely to have weighed on the company’s margins in the quarter to be reported. Higher selling, general and administrative expenses due to increased incentive compensation and elevated R&D expenses to support the company’s growth strategy and new product development might have aggravated the pressure on margins. Nevertheless, savings from Caterpillar’s cost control measures and restructuring actions are expected to have negated some of these headwinds and contributed to the company’s margins.
Segment Expectations
The Zacks Consensus Estimate for the Resource Industries segment’s fourth-quarter external sales stands at $3,202 million, reflecting year-over-year growth of 21% on higher end-user demand for equipment and aftermarket parts as well as favorable price realization. Improvement in heavy construction, quarry and aggregates might have contributed to the segment’s performance. Sales are expected to be up across all regions. The segment is anticipated to report an operating profit of $513 million, suggesting growth of 68% from the year-ago quarter’s figure of $305 million.
The consensus mark for the Construction segment’s external sales stands at $6,474 million, indicating growth of 14% from the year-ago quarter. In North America, demand from both residential and non-residential construction is likely to have aided the segment’s performance in the quarter to be reported. Increased construction activity is expected to have driven machine demand in EAME and Latin America as well.
Lower construction demand in China due to the impact of lockdowns is likely to have been offset by higher demand in other regions of Asia Pacific. The Zacks Consensus Estimate for the Construction segment’s operating profit stands at $1,210 million, indicating growth of 54% from the prior-year quarter.
For the Energy & Transportation segment, the consensus mark for external sales stands at $5,387 million, suggesting an improvement of 13% from the prior-year reported figure. The Zacks Consensus Estimate for the Energy & Transportation segment’s operating profit is pegged at $969 million, suggesting a 44% improvement from the year-ago reported figure.
What Our Model Unveils
Our proven model predicts an earnings beat for Caterpillar for the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is precisely the case here.
You can uncover the best stocks before they're reported with our Earnings ESP Filter.
Earnings ESP: Caterpillar has an Earnings ESP of 1.14%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Shares of the company have gained 17.9% in the past year, compared with the industry’s 16.5% growth.
Stocks Poised to Beat Earnings Estimates
Here are some Industrial Products stocks, which according to our model have the right combination of elements to post an earnings beat in their upcoming releases:
Deere & Co. (DE - Free Report) currently has an Earnings ESP of +2.83% and a Zacks Rank of 2. The Zacks Consensus Estimate for DE’s first-quarter fiscal 2023 earnings have moved 2.6% north in the past 60 days and is currently pegged at $5.49 per share. The consensus mark suggests year-over-year growth of 88.1%
The Zacks Consensus Estimate for DE’s quarterly revenues is pegged at $11.4 billion, indicating growth of 33.9% from the prior-year quarter’s levels. DE has a trailing four-quarter earnings surprise of 7.1%, on average.
Xylem (XYL - Free Report) currently has an Earnings ESP of +2.10% and a Zacks Rank of 3. The Zacks Consensus Estimate for fourth-quarter 2022 earnings has been stable in the past 60 days and is currently pegged at 79 cents per share. This suggests year-over-year growth of 25.4%
The Zacks Consensus Estimate for XYL’s quarterly revenues is pegged at $1.4 billion, indicating year-over-year growth of 6.1%. XYL has a trailing four-quarter earnings surprise of 13.3%, on average.
Illinois Tool Works (ITW - Free Report) currently has an Earnings ESP of +1.92% and a Zacks Rank of 3. The Zacks Consensus Estimate for fourth-quarter 2022 earnings has increased 0.4% in the past 60 days and is currently pegged at $2.61 per share. This suggests year-over-year growth of 33.8%
The Zacks Consensus Estimate for quarterly revenues is pegged at $3.9 billion, indicating growth of 5.3% from the prior-year quarter’s levels. ITW has a trailing four-quarter earnings surprise of 4.2%, on average.
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Caterpillar (CAT) to Post Q4 Earnings: What's in Store?
Caterpillar Inc. (CAT - Free Report) is likely to register an improvement in both the top and the bottom lines when it reports fourth-quarter 2022 results on Jan 31, before the opening bell. Strong demand in its end markets and pricing actions are expected to have negated the impact of inflated costs and supply-chain disruptions, driving the improvement in the quarterly results.
The Zacks Consensus Estimate for quarterly earnings per share for Caterpillar is currently pegged at $3.95, which indicates growth of 47% from the year-ago reported figure. The consensus mark for total sales stands at $15.9 billion, suggesting growth of 15.2% from the prior-year quarter.
Q3 Results & Surprise History
In the last reported quarter, Caterpillar delivered improved year-over-year performance in its revenues and earnings and also beat the respective Zacks Consensus Estimate.
With the earnings beat in the last quarter, the mining and construction equipment behemoth maintained the streak of surpassing earnings estimates for ten consecutive quarters. CAT has a trailing four-quarter earnings surprise of 14.7%, on average.
Caterpillar Inc. Price and EPS Surprise
Caterpillar Inc. price-eps-surprise | Caterpillar Inc. Quote
Factors to Note
Per the Federal Reserve, total industrial production rose at an annual rate of 1.7% in the October-December quarter. These figures indicate that Caterpillar might have witnessed an increase in order levels in the quarter. This, along with the solid backlog of $30 billion reported at the end of the third quarter of 2022, are expected to get reflected in Caterpillar’s third-quarter top line. Also, the fourth quarter of the year is historically the strongest quarter in terms of sales due to seasonal factors, and the fourth quarter of 2022 was no exception.
Supply-chain headwinds, labor constraints currently faced by the industry and inflated costs for raw materials and freight services are likely to have weighed on the company’s margins in the quarter to be reported. Higher selling, general and administrative expenses due to increased incentive compensation and elevated R&D expenses to support the company’s growth strategy and new product development might have aggravated the pressure on margins. Nevertheless, savings from Caterpillar’s cost control measures and restructuring actions are expected to have negated some of these headwinds and contributed to the company’s margins.
Segment Expectations
The Zacks Consensus Estimate for the Resource Industries segment’s fourth-quarter external sales stands at $3,202 million, reflecting year-over-year growth of 21% on higher end-user demand for equipment and aftermarket parts as well as favorable price realization. Improvement in heavy construction, quarry and aggregates might have contributed to the segment’s performance. Sales are expected to be up across all regions. The segment is anticipated to report an operating profit of $513 million, suggesting growth of 68% from the year-ago quarter’s figure of $305 million.
The consensus mark for the Construction segment’s external sales stands at $6,474 million, indicating growth of 14% from the year-ago quarter. In North America, demand from both residential and non-residential construction is likely to have aided the segment’s performance in the quarter to be reported. Increased construction activity is expected to have driven machine demand in EAME and Latin America as well.
Lower construction demand in China due to the impact of lockdowns is likely to have been offset by higher demand in other regions of Asia Pacific. The Zacks Consensus Estimate for the Construction segment’s operating profit stands at $1,210 million, indicating growth of 54% from the prior-year quarter.
For the Energy & Transportation segment, the consensus mark for external sales stands at $5,387 million, suggesting an improvement of 13% from the prior-year reported figure. The Zacks Consensus Estimate for the Energy & Transportation segment’s operating profit is pegged at $969 million, suggesting a 44% improvement from the year-ago reported figure.
What Our Model Unveils
Our proven model predicts an earnings beat for Caterpillar for the fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is precisely the case here.
You can uncover the best stocks before they're reported with our Earnings ESP Filter.
Earnings ESP: Caterpillar has an Earnings ESP of 1.14%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Price Performance
Shares of the company have gained 17.9% in the past year, compared with the industry’s 16.5% growth.
Stocks Poised to Beat Earnings Estimates
Here are some Industrial Products stocks, which according to our model have the right combination of elements to post an earnings beat in their upcoming releases:
Deere & Co. (DE - Free Report) currently has an Earnings ESP of +2.83% and a Zacks Rank of 2. The Zacks Consensus Estimate for DE’s first-quarter fiscal 2023 earnings have moved 2.6% north in the past 60 days and is currently pegged at $5.49 per share. The consensus mark suggests year-over-year growth of 88.1%
The Zacks Consensus Estimate for DE’s quarterly revenues is pegged at $11.4 billion, indicating growth of 33.9% from the prior-year quarter’s levels. DE has a trailing four-quarter earnings surprise of 7.1%, on average.
Xylem (XYL - Free Report) currently has an Earnings ESP of +2.10% and a Zacks Rank of 3. The Zacks Consensus Estimate for fourth-quarter 2022 earnings has been stable in the past 60 days and is currently pegged at 79 cents per share. This suggests year-over-year growth of 25.4%
The Zacks Consensus Estimate for XYL’s quarterly revenues is pegged at $1.4 billion, indicating year-over-year growth of 6.1%. XYL has a trailing four-quarter earnings surprise of 13.3%, on average.
Illinois Tool Works (ITW - Free Report) currently has an Earnings ESP of +1.92% and a Zacks Rank of 3. The Zacks Consensus Estimate for fourth-quarter 2022 earnings has increased 0.4% in the past 60 days and is currently pegged at $2.61 per share. This suggests year-over-year growth of 33.8%
The Zacks Consensus Estimate for quarterly revenues is pegged at $3.9 billion, indicating growth of 5.3% from the prior-year quarter’s levels. ITW has a trailing four-quarter earnings surprise of 4.2%, on average.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.