Caterpillar (CAT), a market leader in manufacturing mining and construction equipment, is up 20% year-to-date.
Tradingbiz analyst Rahul Nambiampurath believes that Caterpillar’s resilience and the ability to adapt to market demands have positioned it as a top performer in the industrial space.
The analyst highlighted, “The industrial sector is benefiting from global economic recovery and government initiatives to revitalize infrastructure. Companies like Caterpillar and its peers are well-positioned to capitalize on these trends.”
He believes that increased infrastructure spending followed by a rebound in mining activities is pushing the entire space to newer heights. CAT’s competitors, like Deere & Company (DE) and Komatsu Ltd. (KMTUY), are also experiencing growth after an extended spell of continued correction.
What are the financials signaling?
Caterpillar released its Q1 2024 performance report on April 25, 2024. Rahul delved deep into the reports, pulling out the points that might be instrumental in pushing the prices higher in days to come. Here are the findings:
- Revenue: $15.8 billion, up 12% year-over-year
- Net Income: $2.1 billion, a significant increase from $1.7 billion in Q1 2023
- Earnings Per Share (EPS): $3.15, exceeding analysts’ expectations
Q2 2024 Guidance: Expected in late July 2024
(Set of insights exclusively churned out by our Tradingbiz analyst)
Projected Revenue: $16.2–$16.5 billion
Expected EPS: $3.30–$3.40
Operating Margin: Anticipated to improve by 1.5%
Rahul mentions, “The recent strength in Caterpillar’s stock, even a month after the Q1 earnings release, can be attributed to several factors, including newfound sector momentum, global economic recovery, and several strategic initiatives, including the use of IoT, AI, and hybrid, sustainable solutions to low the carbon footprint.”
How are the technicals looking for CAT?
Rahul analyzed CAT’s daily chart and summarized the following insights:
Caterpillar (CAT) price chart: TradingView
Minor correction at CAT’s counter could be expected in the short term, which might give buyers new chances of entering the stock at $330. The hidden bearish divergence shown by the relative strength index (RSI) indicator could drive this correction. However, if the CAT manages to breach past the upper trendline of the pennant formation, you can expect the bullish trend to take effect. In that case, the next target for CAT could be $382, almost 10% from the current level.
If the market optimism continues even when the expected high of 382 is breached, the next target for CAT would be $398.
Rahul’s analysis of CAT aligns with Goldman Sachs analyst Jerry Revich’s price target for the stock at $408. The short-term buoyancy is in line with Michael Feninger’s target of $363. For the uninitiated, Feninger is an analyst at Bank of America Securities.
