The stakes are higher than normal for
‘s earnings, to be released early Tuesday morning.
The shares (ticker: CAT) are beating their peers and the market. And investors will be hoping for good news about the continuing recovery in China and the outlook for U.S. construction spending in either a Trump or Biden administration.
Options markets imply that the stock will move about 5%, up or down, after the earnings are reported. That’s a little higher than in recent quarters. Cat stock has moved about 2% on average over the past four quarters.
Here’s what to watch for, along with some recent history.
- Wall Street is looking for $1.15 in per-share earnings from $9.2 billion in sales. Earnings estimates have ticked up by about a nickel, over the past month.
- Last quarter, Caterpillar earned $1.03 a share. Analysts were looking for 65 cents in per-share earnings. Still the stock dropped almost 3% because investors were still unsure the global industrial economy had hit bottom.
- Last year, Caterpillar earned $2.70 a share from $12.8 billion in sales in the third quarter. It is no surprise that the coronavirus has taken its toll on industrial earnings.
- But Caterpillar is a cyclical company, and analysts often start to get more positive just as things are at their worst. “Orders and demand are bottoming, history shows that sharp [capital spending] cuts of the magnitude experienced in 2020 are unsustainable,” wrote Baird analyst Mig Dobre in a research report previewing machinery companies’ earnings. “2021 likely to see growth for [equipment makers] and suppliers.” He likes Cat stock, rating shares Buy. His price target is $196 a share, well above Monday afternoon’s price of about $162.
- Not everyone is as sanguine. “With expectations high …Cat has narrow room to maneuver,” wrote Bernstein analyst Chad Dillard in a report previewing earnings. He appears concerned Cat stock could give up some recent gains if things don’t go well Tuesday, pointing out the stock has outperformed peers recently.
Caterpillar stock is up 13% over the past month. That’s better than the comparable 4% and 2% respective moves of the
Dow Jones Industrial Average
over the same span.
Industrial Select Sector SPDR ETF
(XLI) is up about 4% over the past month as well. The XLI includes some airline shares, skewing comparisons. The machinery components of the S&P 500 are up about 7% over the past month.
Barron’s recently wrote positively about Caterpillar, believing shares would perform well coming out of the industrial recession and as capital spending on automation and renewable energy technologies ramps up in coming years. Wall Street remains split on the stock. Half of the analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the Dow is about 58%.