Caterpillar (CAT) to Post Q1 Earnings: Here's What to Expect
Caterpillar Inc. CAT is likely to register an improvement in both the top and bottom lines when it reports first-quarter 2023 results on Apr 27, before the opening bell. Strong demand in its end markets and pricing actions are expected to have negated the impact of inflated costs and supply-chain disruptions, driving the improvement in the quarterly results.
The Zacks Consensus Estimate for quarterly earnings per share for Caterpillar is currently pegged at $3.78, which indicates growth of 31% from the year-ago reported figure. The consensus mark for total sales is $15.2 billion, suggesting growth of 11.7% from the prior-year quarter.
Q4 Results & Surprise History
In the last reported quarter, Caterpillar delivered improved year-over-year performance in its revenues and earnings. While revenues beat the Zacks Consensus Estimate, earnings missed the same. CAT has a trailing four-quarter earnings surprise of 8.9%, on average.
Caterpillar Inc. Price and EPS Surprise
Caterpillar Inc. price-eps-surprise | Caterpillar Inc. Quote
Factors to Note
Per the Federal Reserve, total industrial production rose at an annual rate of 0.2% in the January-March quarter. Manufacturing output inched up 0.3% at an annual rate. Also, in March 2023, the Institute for Supply Management’s manufacturing index touched 46.3%, contracting for the fifth month in a row. It was the lowest reading from the 43.5% reading in May 2020. The New Orders Index has also been in the contraction territory at 44.3%.
Amid growing concerns of a global economic slowdown, customers seem to be putting their reins on spending. This might have impacted Caterpillar’s order levels in the quarter under review. Nevertheless, the company had reported a solid backlog of $30.4 billion at the end of the fourth quarter of 2022, which is expected to have contributed to the top-line growth in the first quarter of 2023.
Supply-chain headwinds, labor constraints currently faced by the industry and inflated costs for raw materials and freight services are likely to have weighed on the company’s margins in the quarter to be reported. Higher selling, general and administrative expenses due to increased incentive compensation and elevated R&D expenses to support the company’s growth strategy and new product development might have aggravated the pressure on margins. Nevertheless, savings from Caterpillar’s cost control measures and restructuring actions are expected to have negated some of these headwinds and contributed to the company’s margins.
Segment Expectations
The Zacks Consensus Estimate for the Resource Industries segment’s first-quarter external sales is pegged at $3,166 million, suggesting year-over-year growth of 15% on higher end-user demand for equipment and aftermarket parts as well as favorable price realization. Improvement in heavy construction, quarry and aggregates might have contributed to the segment’s performance. The segment is anticipated to report an operating profit of $496 million, suggesting growth of 37% from the year-ago quarter’s figure of $361 million.
The consensus mark for the Construction segment’s external sales is $6,553 million, indicating growth of 7% from the year-ago quarter. In North America, demand from both residential and non-residential construction is likely to have aided the segment’s performance in the quarter to be reported. Increased construction activity is expected to have driven machine demand in EAME and Latin America as well.
Lower construction demand in China due to the impact of lockdowns is likely to have been offset by higher demand in other regions of Asia Pacific. The Zacks Consensus Estimate for the Construction segment’s operating profit is $1,241 million, indicating growth of 17% from the prior-year quarter.
For the Energy & Transportation segment, the consensus mark for external sales is pegged at $4,806 million, suggesting an improvement of 19% from the prior-year reported figure. The Zacks Consensus Estimate for the Energy & Transportation segment’s operating profit is pegged at $852 million, suggesting a 58% improvement from the year-ago reported figure.
What Our Model Unveils
Our proven model predicts an earnings beat for Caterpillar for the first quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is precisely the case here.
You can uncover the best stocks before they're reported with our Earnings ESP Filter.
Earnings ESP: Caterpillar has an Earnings ESP of +1.52%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Price Performance
Image Source: Zacks Investment Research
Shares of the company have fallen 4.4% in the past year compared with the industry’s 4.1% decline.
Other Stocks Poised to Beat Earnings Estimates
Here are some other Industrial Products stocks worth considering, as our model shows that these have the right combination of elements to beat on earnings in their upcoming releases.
Ingersoll Rand Inc. IR is scheduled to report first-quarter 2023 results on May 3. It has an Earnings ESP of +2.32% and currently sports a Zacks Rank #1. The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at 52 cents per share. This suggests year-over-year growth of 6.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for IR’s quarterly revenues is pegged at $1.5 billion, indicating year-over-year growth of 10.7%. IR has a trailing four-quarter earnings surprise of 8.5%, on average.
A. O. Smith Corporation AOS is set to release its first-quarter 2023 results on Apr 27. AOS currently has an Earnings ESP of +5.78% and a Zacks Rank #2. The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at 77 cents per share, suggesting no year-over-year change.
The Zacks Consensus Estimate for AOS’ quarterly revenues is pegged at $913 million, indicating a year-over-year decline of 6.5%. The company has a trailing four-quarter earnings surprise of 3.2%, on average.
Illinois Tool Works ITW is scheduled to report first-quarter 2023 results on May 2. The company currently has an Earnings ESP of +1.49% and a Zacks Rank #3. The Zacks Consensus Estimate for first-quarter 2023 earnings is pegged at $2.19 per share. This suggests year-over-year growth of 3.8%
The Zacks Consensus Estimate for quarterly revenues is pegged at $4 billion, indicating growth of 0.6% from the prior-year quarter’s reported level. ITW has a trailing four-quarter earnings surprise of 0.9%, on average.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
Caterpillar Inc. (CAT) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
Ingersoll Rand Inc. (IR) : Free Stock Analysis Report
