There's been a notable change in appetite for Caterpillar Inc. (NYSE:CAT) shares in the week since its quarterly report, with the stock down 11% to US$151. The result was positive overall - although revenues of US$9.9b were in line with what the analysts predicted, Caterpillar surprised by delivering a statutory profit of US$1.22 per share, modestly greater than expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the consensus forecast from Caterpillar's 18 analysts is for revenues of US$45.2b in 2021, which would reflect an okay 3.5% improvement in sales compared to the last 12 months. Per-share earnings are expected to leap 24% to US$7.52. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$44.9b and earnings per share (EPS) of US$7.45 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The analysts reconfirmed their price target of US$166, showing that the business is executing well and in line with expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Caterpillar, with the most bullish analyst valuing it at US$228 and the most bearish at US$122 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to the analysts, with revenue forecast to grow 3.5%, in line with its 4.2% annual growth over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenues grow 7.4% per year. So it's pretty clear that Caterpillar is expected to grow slower than similar companies in the same industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Caterpillar's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Caterpillar going out to 2023, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 2 warning signs for Caterpillar you should be aware of, and 1 of them can't be ignored.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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