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Caterpillar (CAT) Gains But Lags Market: What You Should Know

Zacks Equity Research

Caterpillar (CAT) closed the most recent trading day at $126.25, moving +0.37% from the previous trading session. This change lagged the S&P 500's 0.43% gain on the day. Elsewhere, the Dow gained 0.5%, while the tech-heavy Nasdaq added 0.75%.

CAT will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $0.69, down 75.62% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $9.05 billion, down 37.28% from the prior-year quarter.

CAT's full-year Zacks Consensus Estimates are calling for earnings of $4.94 per share and revenue of $40.85 billion. These results would represent year-over-year changes of -55.33% and -24.07%, respectively.

Investors might also notice recent changes to analyst estimates for CAT. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate has moved 1% lower within the past month. CAT currently has a Zacks Rank of #4 (Sell).

Looking at its valuation, CAT is holding a Forward P/E ratio of 25.46. For comparison, its industry has an average Forward P/E of 20.22, which means CAT is trading at a premium to the group.

Investors should also note that CAT has a PEG ratio of 2.12 right now. 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 2.99 at yesterday's closing price.

The Manufacturing - Construction and Mining industry is part of the Industrial Products sector. This group has a Zacks Industry Rank of 183, putting it in the bottom 28% 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.

To follow CAT in the coming trading sessions, be sure to utilize Zacks.com.


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