Shareholders might have noticed that Caterpillar Inc. (NYSE:CAT) filed its quarterly result this time last week. The early response was not positive, with shares down 3.2% to US$343 in the past week. It looks like a credible result overall – although revenues of US$16b were in line with what the analysts predicted, Caterpillar surprised by delivering a statutory profit of US$5.75 per share, a notable 14% above expectations. 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. Readers will be glad to know we’ve aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Caterpillar after the latest results.
See our latest analysis for Caterpillar
Taking into account the latest results, Caterpillar’s 19 analysts currently expect revenues in 2024 to be US$66.9b, approximately in line with the last 12 months. Statutory earnings per share are expected to decrease 5.7% to US$21.23 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$67.3b and earnings per share (EPS) of US$20.78 in 2024. So the consensus seems to have become somewhat more optimistic on Caterpillar’s earnings potential following these results.
The consensus price target was unchanged at US$327, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. Currently, the most bullish analyst values Caterpillar at US$441 per share, while the most bearish prices it at US$175. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that revenue is expected to reverse, with a forecast 0.3% annualised decline to the end of 2024. That is a notable change from historical growth of 6.0% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 3.5% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Caterpillar is expected to lag the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Caterpillar’s earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it’s tracking in line with expectations. Although our data does suggest that Caterpillar’s revenue is expected to perform worse than the wider industry. The consensus price target held steady at US$327, with the latest estimates not enough to have an impact on their price targets.
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 2026, and you can see them free on our platform here..
It is also worth noting that we have found 3 warning signs for Caterpillar (1 makes us a bit uncomfortable!) that you need to take into consideration.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
