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Better Buy Heading into 2019: Boeing (BA) vs. Caterpillar (CAT) Stock

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Shares of Boeing (BA - Free Report) and Caterpillar (CAT - Free Report) have fallen victim to the larger market selloff over the last three months. With that said, both Boeing and Caterpillar’s fourth quarter and fiscal 2019 outlooks appear strong.

Overview

The current trade dispute between the world’s two largest economies has caused many investors to sell some of their positions. But there has been some good news recently. The expected 90-day cease-fire has helped the markets somewhat, with new reports out that suggest China will try to grant greater access for foreign companies. Plus, China just made its first significant buy of U.S. soybeans since President Trump and Chinese President Xi Jinping met, according to Reuters.

On top of the broader economic news, Bank of America Merrill Lynch upgraded Caterpillar from “neutral” to “buy” earlier this month and lifted its 12-month price target from $140 to $163 per share. Meanwhile, Cowen aerospace analyst Cai von Rumohr told clients recently that Boeing is his number one stock pick for 2019. He said that firm “is in a production sweet spot” moving into 2019.

Price Movement

Moving on, shares of CAT have fallen 13% over the last three months. Yet, Caterpillar stock popped 1.7% during regular trading Wednesday to reach $125.38 per share. This still marked a roughly 27% downturn from its 52-week high of $173.24 per share and sets up what could be a solid buying opportunity for those high on CAT.

Boeing stock has fallen 7.5% in the past three months. But it also jumped roughly 1.5% Wednesday to $326.94 a share, as part of a larger market resurgence driven by BA, CAT, 3M (MMM - Free Report) , Home Depot (HD - Free Report) , DowDuPont (DWDP - Free Report) , and others. Like CAT, Boeing sits well below its 52-week high, down approximately 17% from $394.28 per share.

 

Valuation

Boeing is currently trading at 17.9X forward 12-month Zacks Consensus EPS estimates, which represent a slight premium compared to the S&P 500’s 15.8X. Meanwhile, CAT is currently trading at a major discount to both the index and BA at 9.7X.

BA is trading near its two-year low. Meanwile, CAT sits near a 10-year low. We can also see that BA began to trade at a premium to CAT in mid-2017.

 

BA Outlook

Looking ahead, Boeing’s fourth quarter revenues are expected to pop 6.3% to hit $26.96 billion, based on our current Zacks Consensus Estimate. Plus, the company’s full-year revenues are projected to jump nearly 7% to reach $99.85 billion. Peeking ahead even further, the company’s 2019 revenues are projected to pop 6.25% above our fiscal 2018 estimate.

At the bottom end of the income statement, Boeing’s adjusted Q4 earnings are expected to slip by 6%. Yet, investors should be very pleased to see that the company’s fiscal 2018 earnings are projected to surge 25%. And Boeing’s following fiscal year earnings are expected to climb 20% above our current year projection.

CAT Outlook

Caterpillar, on the other hand, is projected to see its Q4 revenues climb by 10.6%. On top of that, the company’s full-year revenues are projected to surge 19.7% to reach $54.42 billion. Meanwhile, the company’s 2019 revenues are expected to jump 8.1% above our 2018 estimate.

CAT’s adjusted Q4 earnings are projected to soar by nearly 38% to hit $2.98 per share. Better yet, the construction and mining equipment powerhouse’s adjusted full-year earnings are expected to skyrocket by 69.2%, with its fiscal 2019 EPS figure expected to surge 9.6% higher.

Bottom Line

Caterpillar is currently a Zacks Rank #3 (Hold) based on its recent mixed earnings estimate revision trends. With that said, CAT sports larger top-line growth projections and is trading at a discount compared to BA stock at the moment.

Meanwhile, Boeing’s positive earnings revision activity helps it earn a Zacks Rank #2 (Buy) at the moment. The company also boasts “B” grades for both Value and Growth in our Style Scores system.

Both companies are also dividend payers. Boeing raised its quarterly dividend to $1.71 per share this year, up from $1.42 in the prior year. CAT has paid a quarterly cash dividend of $0.86 a share during fiscal 2018, up from $0.78 last year.

Investors should obviously pay close attention to any trade war updates. Nonetheless, it seems like both Boeing and Caterpillar stock look like they could be solid buys heading into 2019.

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