Why Caterpillar's stock declined There are probably three key reasons: Rising raw material prices have pressured margins at machinery manufacturers, and Caterpillar and others are seeing rising costs.
Full Answer
Why is Caterpillar’s stock price falling?
The stock price of Caterpillar has seen a decline of 6% over the last five trading days. The recent decline can be attributed to rising concerns of slowing growth in China if Evergrande - China’s largest real-estate firm with over $300 billion in debt - were to default.
Why did Caterpillar stock take a dive Friday?
Shares of Caterpillar Inc. took a dive Friday, as surging costs and a disappointing outlook on profit margins overshadowed a big quarterly earnings beat.
Is caterpillar's growth slowing in China?
China's year-over-year growth may be slowing, but that's largely down to the fact that it recovered before Europe and the Americas. The reality is Caterpillar's sales are still forecast to grow by 18% in 2021 and 11.5% in 2022.
Is the Caterpillar Case still bullish?
The slowdown in China's growth has pressured the stock. There's still a bullish case to be made for the Caterpillar. Welcome to the wonderful world of highly cyclical stocks! Just as their earnings tend to oscillate wildly, so do their stock prices.
Why are Caterpillar shares down?
The stock price of Caterpillar (NYSE: CAT) has seen a fall of 13% over the last month, while it is down 10% YTD, owing to a mix of global geo-political factors weighing over the broader markets and the rising costs for the company, given the inflationary headwinds and supply chain constraints.
Is Caterpillar stock a good buy?
Caterpillar's current payout ratio is 41%. This means it paid out 41% of its trailing 12-month EPS as dividend. CAT is expecting earnings to expand this fiscal year as well. The Zacks Consensus Estimate for 2022 is $12.32 per share, representing a year-over-year earnings growth rate of 13.97%.
Is Caterpillar stock a buy sell or hold?
CAT stock is a Hold. Caterpillar's shares have already outperformed the S&P 500 by a substantial margin so far this year, and my price target for CAT does not imply sufficient upside to warrant a Buy rating....About CAT.SymbolLast Price% ChgCATPost217.14 216.521.95% -0.29%Apr 25, 2022
Will CAT stock go back up?
The 23 analysts offering 12-month price forecasts for Caterpillar Inc have a median target of 240.00, with a high estimate of 350.00 and a low estimate of 164.00. The median estimate represents a +7.68% increase from the last price of 222.89.
Is CAT a buy 2022?
Also, in October, JPMorgan analysts reiterated an overweight rating on the stock, with a price target of $248 per share, and called the construction equipment maker their “top pick into 2022.” In terms of forward P/E, CAT is currently trading at 20.59x, which is 7.8% lower than the 22.34x industry average.
Is CAT overvalued?
PB vs Industry: CAT is overvalued based on its Price-To-Book Ratio (6.5x) compared to the US Machinery industry average (2.1x).
What is the future of Caterpillar stock?
Based on 16 Wall Street analysts offering 12 month price targets for Caterpillar in the last 3 months. The average price target is $240.93 with a high forecast of $282.00 and a low forecast of $164.00. The average price target represents a 11.97% change from the last price of $215.18.
Should I sell my CAT stock?
Caterpillar(CAT-N) Rating Stockchase rating for Caterpillar is calculated according to the stock experts' signals. A high score means experts mostly recommend to buy the stock while a low score means experts mostly recommend to sell the stock.
What is the target price for Caterpillar stock?
Stock Price TargetsHigh$350.00Median$240.00Low$164.00Average$241.09Current Price$209.31
Is Caterpillar a good dividend stock?
Taking a look at the company's dividend growth, its current annualized dividend of $4.44 is up 3.7% from last year. Caterpillar has increased its dividend 4 times on a year-over-year basis over the last 5 years for an average annual increase of 9.24%.
Does Caterpillar pay a dividend?
Caterpillar has paid a cash dividend every year since the company was formed and has paid a quarterly dividend since 1933. Caterpillar has paid higher annual dividends to shareholders for 28 consecutive years and is recognized as a member of the S&P 500 Dividend Aristocrat Index.
How much will caterpillar's EV/EBITDA drop in 2021?
Wall Street analysts are forecasting that Caterpillar's EV/EBITDA multiple will drop to 15.6 times EBITDA in 2021, 13.4 times EBITDA in 2022, and 12.3 times EBITDA in 2023. However, as the chart below shows, those valuations are pretty high for Caterpillar at peak EBITDA, so it appears that the market is pricing in a multi-year recovery.
What does YOY mean in Caterpillar presentations?
Data source: Caterpillar presentations. YOY = year over year. Chart by author.
Does rising raw material prices affect machinery manufacturers?
Rising raw material prices have pressured margins at machinery manufacturers, and Caterpillar and others are seeing rising costs.
What happens if you buy Caterpillar stock?
Answer: If you buy and hold Caterpillar stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you - at least if the company is otherwise strong.
How much did Caterpillar spend on repurchases?
Caterpillar spent close to $9 billion on share repurchases between 2018 and 2020, resulting in a 8% drop in total shares outstanding. As such, on a per share basis, earnings plunged 47% to $5.51 in 2020, compared to $10.39 in 2018.
Is CAT stock better than case 1?
CAT stock fares better after Case 1, with an average return of 3.1% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 0.6% for Case 2.
Is Caterpillar's revenue growth going to be good in 2020?
Outlook. 2020 has not been a great year for Caterpillar’s revenue growth, given the lower demand for equipment across its verticals - construction, resource, and energy & transportation. This can be attributed to the impact of the pandemic on the non-residential construction, and lower demand for energy.
Is Cat stock going to rebound?
Now that CAT stock has fallen 7.4% in just five days, will it resume its downward trajectory over the coming weeks, or is a rise in the stock imminent? Going by the historical performance of CAT stock, it appears that the stock will rebound in the near term. Using the recent trend (7.4% fall in a week) and ten years of historical stock data, the Trefis AI engine finds that CAT stock will likely move by 3% over the next one month (twenty-one trading days).
Management is betting that margin pressures will be temporary and supply chain bottlenecks will ease
Shares of Caterpillar Inc. took a dive Friday, as surging costs and a disappointing outlook on profit margins overshadowed a big quarterly earnings beat.
Referenced Symbols
Shares of Caterpillar Inc. took a dive Friday, as surging costs and a disappointing outlook on profit margins overshadowed a big quarterly earnings beat.
What happens if you buy Caterpillar stock?
Answer: If you buy and hold Caterpillar stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you - at least if the company is otherwise strong.
When will caterpillar report its Q2 results?
Caterpillar is scheduled to report its Q2 2020 results on Friday, July 30. We expect Caterpillar to likely post revenue and earnings below the consensus estimates. While a gradual opening up of the economies has resulted in a sharp rebound in overall equipment demand over the recent quarters, a trend likely continued in Q2 as well, the company’s overall performance may be weighed down by higher raw material costs and supply chain headwinds. Furthermore, going by our Caterpillar valuation of $219 per share, which is just 4% above the current market price of $210, there is only a little room left for growth, in our view. Our interactive dashboard analysis on Caterpillar’s Pre-Earnings has additional details.
How much will Caterpillar make in 2021?
We have updated our model following the Q2 release. We now forecast sales to be $49.4 billion for the full-year 2021, up 18% y-o-y, compared to our previous estimate of $48.6 billion. Looking at the bottom line, we estimate adjusted EPS to be $9.90, compared to our earlier estimate of $9.72, and ten cents higher compared to the consensus estimate of $9.80. Given the changes to our revenues and earnings forecast, we have revised our Caterpillar Valuation at $237 per share, based on $9.90 expected EPS and a little under 24x P/E multiple for 2021. This marks an 8% growth from our prior estimate, reflecting a premium of nearly 15% to the current market price of $207.
Is CAT stock better than case 1?
CAT stock fares better after Case 1, with an expected return of 3.2% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an expected return of 1.1% for Case 2. This implies a price forecast of $196 in Case 1 and a figure of $192 in Case 2 using CAT market price of $189.84 on 9/22/2021.
Is the expected return after a rise lower than after a drop?
Answer: The expected return after a rise is understandably lower than after a drop as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks - although CAT stock appears to be an exception to this general observation.
Is CAT stock going to grow in 2020?
While CAT stock may have only a little room left for growth in the near term, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for 3M vs. Ingevity.
Why Caterpillar's Stock Declined
Raw Material Costs
- Starting with raw material costs, CFO Andrew Bonfield said during the earnings call that the third-quarter profit margin would "moderate" from the second quarter. Furthermore, he went on to note, "we do expect higher manufacturing costs, which means that our gross margin percentage will be moderately lower in the second half of the year versus the first half." That's a disappointment, a…
Growth in China
- Usually, with cyclical stocks, each region of the world tends to operate in tandem. However, COVID-19 originated in China and then spread to the rest of the world, meaning that China's growth trend has fallen out of step. As you can see below, the Asia/Pacific region recovered quicker than Europe and North America. The China economy was hit the hardest in the first quar…
valuation Concerns
- Valuing a cyclical stock is always tricky. Not least because it sometimes makes sense to buy cyclical stockson a high valuation and sell on a low valuation. They tend to trade on a high valuation precisely when earnings bottom and then take off. The cycle continues until they trade on low valuations at peak earnings, just as earnings start declining. You can see these dynamic…
The Bulls' Case
- In response, it's worth highlighting a few points. First, rising raw material prices are an issue, but they stem from the fact that construction activity is strong, and so is energy and mining demand. That's arguably a net positive for Caterpillar's revenue generation, and once the company starts pushing through price increases, its margin should improve. Second, the worries over China's gr…