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Caterpillar (CAT) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research

Caterpillar (CAT) closed at $147.48 in the latest trading session, marking a -0.69% move from the prior day. This change lagged the S&P 500's 0.02% loss on the day. Meanwhile, the Dow lost 0.13%, and the Nasdaq, a tech-heavy index, added 0.08%.

Prior to today's trading, shares of the construction equipment company had gained 1.42% over the past month. This has lagged the Industrial Products sector's gain of 4.36% and the S&P 500's gain of 3.81% in that time.

Wall Street will be looking for positivity from CAT as it approaches its next earnings report date. This is expected to be January 31, 2020. In that report, analysts expect CAT to post earnings of $2.38 per share. This would mark a year-over-year decline of 6.67%. Meanwhile, our latest consensus estimate is calling for revenue of $13.63 billion, down 4.96% from the prior-year quarter.

CAT's full-year Zacks Consensus Estimates are calling for earnings of $10.85 per share and revenue of $54.23 billion. These results would represent year-over-year changes of -3.3% and -0.9%, respectively.

It is also important to note the recent changes to analyst estimates for CAT. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.14% lower. CAT is currently a Zacks Rank #3 (Hold).

In terms of valuation, CAT is currently trading at a Forward P/E ratio of 13.69. This valuation marks a premium compared to its industry's average Forward P/E of 13.42.

It is also worth noting that CAT currently has a PEG ratio of 1.56. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Manufacturing - Construction and Mining was holding an average PEG ratio of 1.49 at yesterday's closing price.

The Manufacturing - Construction and Mining industry is part of the Industrial Products sector. This industry currently has a Zacks Industry Rank of 246, which puts it in the bottom 4% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.

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