Caterpillar digs deep for profits

Caterpillar will report its third-quarter figures on Thursday 23 October. The consensus is for revenue of $13.19 billion and earnings per share of $1.34.

Caterpillar logo
Source: Bloomberg

Caterpillar is trading at $95.04. The share price is down 12.6% since the company reported its second-quarter profits in July, in which revenue and EPS came in at $14.15 billion and $1.69 respectively. Analysts were expecting $14.5 billion and $1.52 — the stellar earning number was largely down to cost-cutting. Although the slowdown in the mining sector weighed on sales, the construction activity in North America picked up which has helped the demand for heavy machinery.

The decline in share price over the past two months was in line with the drop in metal prices, largely driven by weak economic data from China. Overnight, Beijing revealed that the economy grew by 7.3% in the third quarter. This was the slowest expansion in quarterly growth since early 2009 but it still managed to beat estimates. 

Equity analysts are bullish on Caterpillar. Out of the 29 recommendations, nine are buys and 20 are holds.

The boom-years from the mining industry are on the way out so cost-cutting would need to be kept up to offset the difference. Good results could drive the share price to $101.50, and if the company were to lower its full-year outlook the stock could drop to $88.

 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts