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Caterpillar (CAT) Gains As Market Dips: What You Should Know

Zacks Equity Research

Caterpillar (CAT) closed at $142.93 in the latest trading session, marking a +0.07% move from the prior day. This move outpaced the S&P 500's daily loss of 0.11%. Elsewhere, the Dow lost 0.1%, while the tech-heavy Nasdaq lost 0.07%.

Heading into today, shares of the construction equipment company had lost 3.49% over the past month, lagging the Industrial Products sector's gain of 0.21% and the S&P 500's gain of 1.62% in that time.

Investors will be hoping for strength from CAT as it approaches its next earnings release, which is expected to be January 31, 2020. On that day, CAT is projected to report earnings of $2.40 per share, which would represent a year-over-year decline of 5.88%. Our most recent consensus estimate is calling for quarterly revenue of $13.69 billion, down 4.58% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $10.87 per share and revenue of $54.28 billion. These totals would mark changes of -3.12% and -0.82%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for CAT. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about 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.

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. Over the past month, the Zacks Consensus EPS estimate remained stagnant. CAT currently has a Zacks Rank of #4 (Sell).

In terms of valuation, CAT is currently trading at a Forward P/E ratio of 13.14. This represents a premium compared to its industry's average Forward P/E of 12.93.

It is also worth noting that CAT currently has a PEG ratio of 1.5. 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 industry currently had an average PEG ratio of 1.44 as of yesterday's close.

The Manufacturing - Construction and Mining industry is part of the Industrial Products sector. This group has a Zacks Industry Rank of 252, putting it in the bottom 2% 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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