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Caterpillar (CAT) to Report Q4 Earnings: What's in the Offing?
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Caterpillar Inc. (CAT - Free Report) is likely to have registered an improvement in both the top and bottom lines when it reports fourth-quarter 2023 results on Feb 5, before the opening bell.
Q4 Estimates
The Zacks Consensus Estimate for CAT’s total sales is $17.15 billion, suggesting growth of 3.4% from the prior-year quarter.
The consensus estimate for quarterly earnings per share for Caterpillar is currently $4.76, which indicates growth of 23.3% from the year-ago reported figure. The earnings estimates have remained unchanged in the past 30 days.
Q3 Results & Surprise History
In the last reported quarter, Caterpillar delivered an improved year-over-year performance in its revenues and earnings. The company also beat the Zacks Consensus Estimate on both metrics. CAT has a trailing four-quarter earnings surprise of 16.6%, on average.
Per the Federal Reserve, for the fourth quarter of 2023, industrial production declined at an annual rate of 3.1% and manufacturing output was down 2.2%. In December 2023, the Institute for Supply Management’s manufacturing index was 47.4%. Even though the figure remained below 50 (indicating contraction), it marked an improvement from the readings of 46.7% in both November and October. The New Orders Index has been in the contraction territory with its December reading of 47.1%, following a 48.3% reading in November and 45.5% in October.
Customers have been putting their reins on spending due to the persistent inflationary scenario. This is likely to have impacted Caterpillar’s order levels in the quarter under review. Nevertheless, the company had reported a solid backlog of $28.1 billion at the end of the third quarter of 2023, which is expected to have contributed to the top-line growth in the fourth quarter of 2023.
On a positive note, the delivery performance of suppliers to manufacturing organizations was reported to be improving for the 152nd consecutive month in December. The Supplier Deliveries Index registered 47% growth in December, compared with 46.2% in November and 47.7% in October. This indicates that the supply-chain issues, which have been plaguing the industry as well as Caterpillar, have been showing signs of easing.
The company has been witnessing higher costs for raw materials and freight services, which have weighed on the company’s margins in the previous quarters. However, there has been a moderation of input cost inflation lately. We expect the company’s cost of sales to decline 2.4% in the fourth quarter, which is expected to have aided margins in the quarter.
However, these gains are likely to have been offset by higher selling, general and administrative (SG&A) expenses due to increased incentive compensation and elevated research and development (R&D) expenses to support the company’s growth strategy. Also, spending on new product development is expected to have aggravated the pressure on margins. We expect SG&A expenses to increase 24.9% and R&D expenses to rise 50.7% in the fourth quarter.
Nevertheless, savings from Caterpillar’s cost-control measures and restructuring actions are likely to have negated some of these setbacks and contributed to the margin expansion.
Our model projects a 0.8% year-over-year increase in operating income to $2.84 billion. The operating margin for the fourth quarter is projected to be 16.6% for the quarter under review.
Segment Expectations
The Resource Industries segment’s fourth-quarter external sales are pegged at $3.2 billion, suggesting a year-over-year decline of 3.7%, per our model. We expect a decline in dealer inventories in the fourth quarter of 2023 compared to the surge in dealer inventory seen In the fourth quarter of 2022. We expect the segment’s volume to decline 4.6%, which will be somewhat offset by a 1.1% rise in pricing.
The segment is expected to report an operating profit of $519 million, suggesting a 14.3% decline from the year-ago quarter’s figure of $605 million. The segment’s margins are projected to be 16.1%, which is expected to be lower compared with the year-ago quarter owing to lower volumes.
We project the Construction segment’s external sales to be $6.9 billion, indicating growth of 1.2% from the year-ago quarter. For the fourth quarter, we do not expect the typical seasonal sales increase as dealers continue to lower their inventory. We expect a 0.2% dip in volume, which will be offset by a 1.1% pricing growth.
The Construction segment’s operating profit is projected to be $1.28 billion, indicating a year-over-year decline of 13.7%.
For the Energy & Transportation segment, the estimate for external sales is $6.3 billion, suggesting an 11.6% improvement from the prior-year reported figure. Volume growth is projected to be 9.4%, reflecting the solid demand across all applications and regions. Pricing is expected to contribute 1.5% to the sales growth.
The estimate for the segment’s operating profit is pegged at $1.3 billion, suggesting a 10% improvement from the year-ago reported figure, aided by higher volume and stronger price realization.
What Our Model Unveils
Our model predicts an earnings beat for CAT this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That 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 +12.89%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Price Performance
Shares of the company have gained 22.2% in the past year compared with the industry’s 20.7% growth.
Image Source: Zacks Investment Research
Other Stocks Poised to Beat Earnings Estimates
Here are some other stocks with the right combination of elements to post an earnings beat in their upcoming releases.
The Zacks Consensus Estimate for RS’ earnings for the fourth quarter is pegged at $3.88 per share. The consensus estimate for the quarterly earnings has moved up 0.3% in the past 30 days. RS has an average trailing four-quarter earnings surprise of 10.6%.
Terex Corporation (TEX - Free Report) , scheduled to release earnings on Feb 8, has an Earnings ESP of +1.25% and a Zacks Rank of 3.
The Zacks Consensus Estimate for TEX’s fourth-quarter earnings is pegged at $1.41 per share. The earnings estimate has moved up 0.7% in the past 30 days. TEX has an average trailing four-quarter earnings surprise of 30.4%.
Ingersoll Rand Inc. (IR - Free Report) , scheduled to release earnings on Feb 15, currently has an Earnings ESP of +0.98% and a Zacks Rank of 3.
The consensus estimate for Ingersoll Rand’s earnings for the fourth quarter is pegged at 76 cents per share. The earnings estimate has been unchanged in the past 30 days. It has an average trailing four-quarter earnings surprise of 16.1%.
Image: Bigstock
Caterpillar (CAT) to Report Q4 Earnings: What's in the Offing?
Caterpillar Inc. (CAT - Free Report) is likely to have registered an improvement in both the top and bottom lines when it reports fourth-quarter 2023 results on Feb 5, before the opening bell.
Q4 Estimates
The Zacks Consensus Estimate for CAT’s total sales is $17.15 billion, suggesting growth of 3.4% from the prior-year quarter.
The consensus estimate for quarterly earnings per share for Caterpillar is currently $4.76, which indicates growth of 23.3% from the year-ago reported figure. The earnings estimates have remained unchanged in the past 30 days.
Q3 Results & Surprise History
In the last reported quarter, Caterpillar delivered an improved year-over-year performance in its revenues and earnings. The company also beat the Zacks Consensus Estimate on both metrics. CAT has a trailing four-quarter earnings surprise of 16.6%, on average.
Caterpillar Inc. Price and EPS Surprise
Caterpillar Inc. price-eps-surprise | Caterpillar Inc. Quote
Factors to Note
Per the Federal Reserve, for the fourth quarter of 2023, industrial production declined at an annual rate of 3.1% and manufacturing output was down 2.2%. In December 2023, the Institute for Supply Management’s manufacturing index was 47.4%. Even though the figure remained below 50 (indicating contraction), it marked an improvement from the readings of 46.7% in both November and October. The New Orders Index has been in the contraction territory with its December reading of 47.1%, following a 48.3% reading in November and 45.5% in October.
Customers have been putting their reins on spending due to the persistent inflationary scenario. This is likely to have impacted Caterpillar’s order levels in the quarter under review. Nevertheless, the company had reported a solid backlog of $28.1 billion at the end of the third quarter of 2023, which is expected to have contributed to the top-line growth in the fourth quarter of 2023.
On a positive note, the delivery performance of suppliers to manufacturing organizations was reported to be improving for the 152nd consecutive month in December. The Supplier Deliveries Index registered 47% growth in December, compared with 46.2% in November and 47.7% in October. This indicates that the supply-chain issues, which have been plaguing the industry as well as Caterpillar, have been showing signs of easing.
The company has been witnessing higher costs for raw materials and freight services, which have weighed on the company’s margins in the previous quarters. However, there has been a moderation of input cost inflation lately. We expect the company’s cost of sales to decline 2.4% in the fourth quarter, which is expected to have aided margins in the quarter.
However, these gains are likely to have been offset by higher selling, general and administrative (SG&A) expenses due to increased incentive compensation and elevated research and development (R&D) expenses to support the company’s growth strategy. Also, spending on new product development is expected to have aggravated the pressure on margins. We expect SG&A expenses to increase 24.9% and R&D expenses to rise 50.7% in the fourth quarter.
Nevertheless, savings from Caterpillar’s cost-control measures and restructuring actions are likely to have negated some of these setbacks and contributed to the margin expansion.
Our model projects a 0.8% year-over-year increase in operating income to $2.84 billion. The operating margin for the fourth quarter is projected to be 16.6% for the quarter under review.
Segment Expectations
The Resource Industries segment’s fourth-quarter external sales are pegged at $3.2 billion, suggesting a year-over-year decline of 3.7%, per our model. We expect a decline in dealer inventories in the fourth quarter of 2023 compared to the surge in dealer inventory seen In the fourth quarter of 2022. We expect the segment’s volume to decline 4.6%, which will be somewhat offset by a 1.1% rise in pricing.
The segment is expected to report an operating profit of $519 million, suggesting a 14.3% decline from the year-ago quarter’s figure of $605 million. The segment’s margins are projected to be 16.1%, which is expected to be lower compared with the year-ago quarter owing to lower volumes.
We project the Construction segment’s external sales to be $6.9 billion, indicating growth of 1.2% from the year-ago quarter. For the fourth quarter, we do not expect the typical seasonal sales increase as dealers continue to lower their inventory. We expect a 0.2% dip in volume, which will be offset by a 1.1% pricing growth.
The Construction segment’s operating profit is projected to be $1.28 billion, indicating a year-over-year decline of 13.7%.
For the Energy & Transportation segment, the estimate for external sales is $6.3 billion, suggesting an 11.6% improvement from the prior-year reported figure. Volume growth is projected to be 9.4%, reflecting the solid demand across all applications and regions. Pricing is expected to contribute 1.5% to the sales growth.
The estimate for the segment’s operating profit is pegged at $1.3 billion, suggesting a 10% improvement from the year-ago reported figure, aided by higher volume and stronger price realization.
What Our Model Unveils
Our model predicts an earnings beat for CAT this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That 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 +12.89%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Price Performance
Shares of the company have gained 22.2% in the past year compared with the industry’s 20.7% growth.
Image Source: Zacks Investment Research
Other Stocks Poised to Beat Earnings Estimates
Here are some other stocks with the right combination of elements to post an earnings beat in their upcoming releases.
Reliance Steel & Aluminum Co. (RS - Free Report) , scheduled to release earnings on Feb 15, has an Earnings ESP of +3.35% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RS’ earnings for the fourth quarter is pegged at $3.88 per share. The consensus estimate for the quarterly earnings has moved up 0.3% in the past 30 days. RS has an average trailing four-quarter earnings surprise of 10.6%.
Terex Corporation (TEX - Free Report) , scheduled to release earnings on Feb 8, has an Earnings ESP of +1.25% and a Zacks Rank of 3.
The Zacks Consensus Estimate for TEX’s fourth-quarter earnings is pegged at $1.41 per share. The earnings estimate has moved up 0.7% in the past 30 days. TEX has an average trailing four-quarter earnings surprise of 30.4%.
Ingersoll Rand Inc. (IR - Free Report) , scheduled to release earnings on Feb 15, currently has an Earnings ESP of +0.98% and a Zacks Rank of 3.
The consensus estimate for Ingersoll Rand’s earnings for the fourth quarter is pegged at 76 cents per share. The earnings estimate has been unchanged in the past 30 days. It has an average trailing four-quarter earnings surprise of 16.1%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.