Machinery giant
Caterpillar
is slated to report third-quarter earnings on Tuesday morning. Results will tell investors a lot about how the economy is shaping up heading into 2024.
Wall Street is looking for earnings per share of $4.80 from sales of $16.6 billion, according to FactSet. A year ago in the third quarter of 2022,
Caterpillar
(ticker: CAT) reported EPS of $3.95 from sales of $15 billion.
Sales are up because prices are higher and Caterpillar is shipping more equipment to customers. End markets have been recovering from Covid-related lows and supply-chain issues that constrained production and led to lower dealer inventories.
While things are OK today, investors will be looking for insights about what comes next.
“In a nutshell, during first quarter 2023 and second quarter 2023 [earnings reports], investor focus rested on potential margin upside from normalizing supply chains and price/cost tailwinds,” wrote Baird analyst Mig Dobre in an earnings preview report. “Attention will now shift to backlog/order progression.”
Cat ended the second quarter with a backlog of $30.7 billion, up from $30.4 billion in the first quarter and up from about $30 billion at the end of the third quarter of 2022.
Management said on the second-quarter earnings conference call that dealer inventories increased by $600 million in the second quarter.
Backlog and inventories will be scrutinized when Cat reports results. Economic weakness can lead dealers to stop ordering, pressuring backlog. Management hosts a conference call at 8:30 a.m. Eastern time.
Dobre isn’t optimistic about the coming update. He rates shares Sell and has a $232 price target for Cat stock. Overall, 42% of the analysts covering Cat stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the
S&P 500
is about 55%. The average analyst price target for Cat is about $288 a share.
Caterpillar stock is up about 12% over the past 12 months. The
S&P 500
and
Dow Jones Industrial Average
were up about 8% and 1%, respectively.
Write to Al Root at [email protected]
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