Does Caterpillar's Performance Make It a Good Investment?

NYSE: CAT | Caterpillar, Inc.  News, Ratings, and Charts

CAT – Caterpillar (CAT)’s first quarter results exceeded analysts’ expectations with a strong bottom-line performance. Given that, let’s probe into the company’s prospects and determine if its performance positions it as a compelling investment opportunity. Read more to find out….

With a 159.79 billion market cap, Caterpillar Inc. (CAT) is the world’s leading construction, mining, and energy machinery and equipment manufacturer. Unlike many of its industrial peers, CAT’s shares have been on a steady rise thanks to its resilient and consistent performance. The company reported solid first-quarter results benefiting from favorable macro trends such as increased construction activity, reshoring efforts, and the transition towards renewables.

CAT reported revenues of $15.80 billion for the first quarter, driven by healthy demand across its key market segments. Its Energy & Transportation segment sales were $6.68 billion, up 6.8% year-over-year. Caterpillar’s Financial Products segment revenues came in at $991 million, compared to $902 million in the prior year’s quarter. The company’s non-GAAP profit per share stood at $5.60, beating the consensus estimate of $5.13.

Demonstrating its commitment to returning value to shareholders, CAT deployed a record $15.1 billion in cash for share repurchases and dividends during the quarter. The company also announced an 8% increase in its quarterly dividend to $1.41 per share, payable on August 20, 2024, and added $20 billion to its current share repurchase authorization.

Caterpillar’s track record of paying higher annual dividends for 30 consecutive years has earned it a spot in the S&P 500 Dividend Aristocrats Index. It’s no surprise that CAT’s stock has gained 19.1% over the past nine months and 39.4% over the past year to close the last trading session at $326.73.

Here is what could impact CAT’s performance in the upcoming months:

Positive Recent Developments

On May 16, 2024, the company announced a $90 million investment to upgrade its facilities in Schertz and Seguin, Texas, for the production of the new Cat® C13D industrial engine. This investment will create 25 jobs in Schertz starting in 2026.

The C13D, a 13-liter diesel engine, is designed for optimal performance in heavy-duty applications such as material handling, construction, mining, and aircraft ground support. The investment includes $70 million for new equipment in Schertz for engine components and $20 million in Seguin for engine assembly.

Production of the C13D engine is slated to commence in 2026, underscoring CAT’s ongoing commitment to innovation and sustainability in its industry-leading offerings.

Solid Financials

In the first quarter that ended on March 31, 2024, CAT reported sales and revenue of $15.80 billion, nearly unchanged from the $15.86 billion in the same period last year. Its operating profit grew 28.8% from the year-ago value to $3.52 billion, while its non-GAAP profit before income taxes came in at $3.53 billion, up 8.7% from the prior year’s quarter.

Furthermore, the company’s adjusted profit attributable to common shareholders amounted to $2.78 billion or $5.60 per share, reflecting an increase of 9.1% and 14.1% year-over-year, respectively. CAT reported an enterprise operating cash flow of $2.10 billion, and it ended the first quarter with $5 billion of enterprise cash.

Impressive Historical Growth

CAT’s revenue has grown at a CAGR of 15.9% over the past three years. Its EBITDA and net income have increased at CAGRs of 26.9% and 48.5%, respectively, over the same period. Also, the company’s EPS has grown at a CAGR of 52.4% over the same timeframe, and its levered free cash flow has improved at a CAGR of 61%.

Mixed Analyst Expectations

Analysts expect CAT’s EPS for the fiscal year (ending December 2024) to grow 2.1% year-over-year to $21.66. However, the consensus revenue estimate of $66.40 billion for the current year indicates a marginal decline from the prior year.

Nonetheless, for the fiscal year 2025, CAT’s EPS is expected to increase 4.8% year-over-year to $22.71. The company is estimated to generate a revenue of $68.86 billion next year, indicating a 3.7% improvement from the prior year period.

Solid Profitability

CAT’s trailing-12-month EBITDA margin of 23.78% is 73.1% higher than the 13.74% industry average. The stock’s trailing-12-month levered FCF margin of 10.67% is 67.9% higher than the 6.35% industry average. Similarly, its 16.79% trailing-12-month net income margin is 177.3% above the industry average of 6.05%.

Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 62.86%, 15.66%, and 13.43% favorably compares to the industry averages of 12.63%, 7.15%, and 4.85%, respectively.

POWR Ratings Reflect Promise

CAT’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CAT has also earned a B grade for Quality, in sync with its higher-than-industry profitability.

Within the A-rated Industrial – Machinery industry, CAT is ranked #30 out of 79 stocks.

Beyond what I have stated above, we have also given CAT grades for Growth, Value, Momentum, Stability, and Sentiment. Get all CAT ratings here.

Bottom Line

Caterpillar has kicked off fiscal year 2024 with strong operating margins, profit per share, and operating cash flow, setting a positive tone for the year ahead. These metrics underscore CAT’s solid business momentum and strategic execution. Further, with economic indicators pointing towards healthy GDP growth and easing inflation conducive to increased industrial spending, CAT is well-positioned to outperform in the current market cycle.

Moreover, the stock is currently trading above its 200-day moving average of $305.87, indicating an uptrend.

Given Caterpillar’s robust financial performance, accelerating profitability, reliable dividends, and bright growth outlook investing in this stock now could be a wise choice.

How Does Caterpillar Inc. (CAT) Stack Up Against Its Peers?

While CAT has an overall POWR Rating of B, investors could also check out these other stocks within the A-rated Industrial – Machinery industry with an A (Strong Buy) rating: Twin Disc, Incorporated (TWIN), Donaldson Company, Inc. (DCI) and Tennant Company (TNC).

To explore more A and B-rated industrial machinery stocks, click here

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >


CAT shares were trading at $327.93 per share on Thursday morning, up $1.20 (+0.37%). Year-to-date, CAT has gained 11.83%, versus a 15.57% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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