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Is a Beat in the Offing for Caterpillar's (CAT) Q1 Earnings?

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Caterpillar Inc. CAT is scheduled to report first-quarter 2021 results on Apr 29, before the opening bell.

Q4 Results & Surprise History

In the last reported quarter, Caterpillar’s top and bottom lines declined on a year-over-year basis due to lower demand across all segments and geographies amid the coronavirus pandemic. However, results were better than expected as both earnings and revenues beat the respective Zacks Consensus Estimate.

In the trailing four quarters, the mining and construction equipment behemoth beat estimates in three of the trailing four quarter and missed the same once. It has a trailing four-quarter earnings surprise of 27.2%, on average.

Q1 Estimates

The Zacks Consensus Estimate for first-quarter total sales is pegged at $11.05 billion, suggesting growth of 3.9% from the prior-year quarter. The consensus mark for earnings per share currently stands at $1.93, indicating an improvement of 21% from the year-ago reported figure. Notably, the earnings estimate has been revised upward by 2% over the past 30 days.

Caterpillar Inc. Price and EPS Surprise

Caterpillar Inc. Price and EPS Surprise
Caterpillar Inc. Price and EPS Surprise

Caterpillar Inc. price-eps-surprise | Caterpillar Inc. Quote

Factors to Note

At the end of fourth-quarter 2020, Caterpillar’s order backlog was $14.2 billion, reflecting a $0.8 billion increase on a sequential basis and $0.5 billion on a year-over-year basis. The manufacturing sector has been recovering from the COVID-19 induced slowdown aided by resumption of the global economic activities and reopening of businesses. For the first quarter, total industrial production rose 2.5% at an annual rate. Also, commodity prices have been improving so far this year. This might have translated into higher order levels for Caterpillar through the quarter. This, along with a stronger backlog and dealer restocking may have benefited Caterpillar’s first-quarter performance.

Further, the company has been taking actions to lower costs in the wake of the coronavirus crisis. This, in turn, might have contributed to margins in the quarter to be reported.

Segment Expectations

For the Machinery, Energy & Transportation segment, which generates around 90% of the company’s total revenues, the Zacks Consensus Estimate for first-quarter 2021 is pegged at $10.4 billion, suggesting an increase of 5% from the prior-year quarter.

The Zacks Consensus Estimate for the Resource Industries segment’s first-quarter external sales stands at $2,071 million, indicating year-over-year growth of 5%. Through the quarter, iron ore prices remained strong. Copper and silver prices picked up on the back of recovery in industrial activity. Even though gold prices have been volatile, it remains higher than the prior year levels. This might have translated into improved orders for the company.

The Zacks Consensus Estimate for the Construction segment’s first-quarter external sales is pegged at $4,876 million, indicating a 13% increase from the year-ago quarter aided by strength in China and pickup in residential construction in North America.

For the Energy & Transportation segment, the Zacks Consensus Estimate for external sales stands at $3,461 million, indicating a decline of 4% from the prior-year reported figure.

For the to-be-reported quarter, the Zacks Consensus Estimate for operating profit for the Machinery, Energy & Transportation segment is pegged at $1,339 million, flat compared with the prior-year quarter. The Resource Industries segment is anticipated to report an operating profit of $315 million, suggesting growth of 4% from the year-ago quarter courtesy of higher sales and leverage, and favorable mix.

The Zacks Consensus Estimate for the Energy & Transportation segment is pegged at $563 million, suggesting a decline of 6% from the year-ago reported figure. The Zacks Consensus Estimate for the Construction segment’s operating profit stands at $781 million, projecting a 22% jump from the prior-year quarter. Stronger sales and leverage on higher volumes might have contributed to the margin expansion.

What Our Model Unveils

Our proven model predicts an earnings beat for Caterpillar 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.

Earnings ESP: Caterpillar has an Earnings ESP of +3.15%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance

Shares of the company have gained 100.7% in the past year, compared with the industry’s rally of 104.1%.

Other Stocks Poised to Beat Earnings Estimates

Here are some other Industrial Products stocks, which you may consider as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming releases.

Zebra Technologies Corporation ZBRA, currently a Zacks #2 Ranked stock, has an Earnings ESP of +1.63%.

AGCO Corporation AGCO has an Earnings ESP of +2.94% and a Zacks Rank of 3, currently.

O I Glass, Inc. OI has a Zacks Rank #3 and an Earnings ESP of +2.11%, at present.

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Caterpillar Inc. (CAT) : Free Stock Analysis Report

AGCO Corporation (AGCO) : Free Stock Analysis Report

OI Glass, Inc. (OI) : Free Stock Analysis Report

Zebra Technologies Corporation (ZBRA) : Free Stock Analysis Report

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