Caterpillar Inc.‘s CAT shares attained a 52-week high of $110 during intraday trading on Jul 12, finally closing lower at $108.96. The company has delivered a year-to-date return of about 19.4%. Caterpillar has a market cap of $64.2 billion. Average volume of shares traded in the last three months was approximately 4.86 million.
What's Driving Caterpillar?
Caterpillar’s share price has gained since it reported May sales report on Jun 20, 2017. The company reported a rise of 8% in sales, a pick up from 1% growth witnessed in April and March. Overall performance was led by Asia Pacific which witnessed 49% rise in sales. Overall sales at Resource Industries were down 3%, nevertheless an improvement from the 19% decline suffered in March and April. Sales in Construction Industries improved 11% year over year, depicting an upward trend since Feb 2017 owing to 52% surge in sales in Asia Pacific.
The Asia Pacific region has been a consistent performer for Caterpillar since it posted the first positive reading in Aug 2016. Since then the company has been witnessing a growing trend in sales in the region with the growth graph steadily picking up steam from single digits to growth of 49% witnessed in May. It is also worth mentioning that after four successive months of declines, North America has delivered positive growth in May. Though in Latin America, growth still remains in the negative territory and is muted compared with the prior months.
Caterpillar which has so far been grappling with the commodities rout triggered by a slowdown in China and excess supplies of most metals and energy products, is finally showing signs of turnaround this year. This has been made possible by relentless cost saving actions along with improvement in construction and Asia Pacific. In first-quarter 2017, the company delivered year-over-year improvement in both the top line and bottom line for the first time in 10 quarters. Backlog improved on a year-over-year basis for the first time since third-quarter 2014.
The company has outperformed the Zacks categorized Machinery – Construction/ Mining subindustry in the past one year. Shares have gained 40.9% while the industry registered an increase of 39.9%.
Quoting activity remains promising in many of Caterpillar’s markets and retail sales are turning positive for both machines and Energy & Transportation for the first time in several years. The company estimates revenues around $38 billion to $41 billion for 2017, depicting a 2% rise from the revenues reported in fiscal 2016. It now anticipates earnings per share (excluding restructuring costs) of $3.75, reflecting a 10% improvement over 2016 earnings.
Caterpillar recently announced that its board of directors have approved 1.3% increase in quarterly dividend to 78 cents per share after a hiatus of two years. The move reflects balance sheet strength and improved cost structure which has once again enabled the company to deliver incremental returns to shareholders. Going forward, the company is expected to benefit from President Trump’s plans of big spending in infrastructure as it is anticipated to play a major role in the national infrastructure plan.
Caterpillar, Inc. Price and Consensus
Caterpillar, Inc. Price and Consensus | Caterpillar, Inc. Quote
Estimates for Caterpillar have moved up in the past 60 days, reflecting the optimistic outlook of analysts. The earnings estimate for fiscal 2017 has gone up 2% while that of fiscal 2018 has moved up 3%.
Caterpillar currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same space include Apogee Enterprises, Inc. APOG, Belden Inc. BDC and Deere & Company DE, each boasting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Apogee has an average positive earnings surprise of 3.42% in the trailing four quarters. Belden delivered an average positive earnings surprise of 7.17% in the preceding four quarters. Deere & Company generated an average positive earnings surprise of 70.41% in the last four quarters.
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