Will Caterpillar Stock Rise After Its Q1 Earnings?

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Caterpillar (NYSE: CAT) is scheduled to report its Q1 2022 results on Thursday, April 28. We expect Caterpillar to post revenue and earnings below the consensus estimates. While a strong demand and pricing environment will drive the company’s revenue growth, its overall performance may be weighed down due to inflationary headwinds. That said, our forecast indicates that CAT stock has more room for growth from its current levels, as we discuss below. Our interactive dashboard analysis of Caterpillar’s Earnings Preview has additional details.

(1) Revenues expected to be below the consensus estimates

  • Trefis estimates Caterpillar’s Q1 2022 revenues to be around $12.9 billion, below the $13.4 billion consensus estimate.
  • All of Caterpillar’s segments have seen steady growth over the recent quarters, a trend expected to continue in Q1 as well, driven by strong demand and pricing environment.
  • However, rising labor and raw materials costs may have weighed on the overall revenue growth.
  • Looking back at Q4 2021, total revenues grew a solid 23% y-o-y to $13.8 billion, with gains across the company’s businesses. Our dashboard on Caterpillar’s Revenues offers more details on the company’s segments.
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(2) EPS likely to be below the consensus estimates

  • Caterpillar’s Q1 2022 adjusted earnings per share (EPS) is expected to be $2.45 per Trefis analysis, compared to the consensus estimate of $2.60.
  • Caterpillar’s adjusted net income of $1.5 billion in Q4 2021 reflected a considerable 25% y-o-y rise, compared to $1.2 billion seen in the prior-year quarter.
  • This growth was primarily driven by higher revenues. The company’s operating margin declined 60 bps to 11.6% in Q4, compared to 12.3% in the year-ago quarter.
  • Our dashboard on Caterpillar’s Operating Income has more details.
  • Looking forward, we expect the full-year 2022 adjusted EPS to be higher at $11.25, compared to $8.74 in 2020 and $10.81 in 2021.

(3) Stock price estimate above the current market price

  • We estimate Caterpillar’s Valuation to be around $244 per share, which is 13% above its current market price of $216.
  • This represents a forward P/EBITDA multiple of 16x for the company based on Caterpillar’s EBITDA.
  • That said, if the company reports upbeat results, with sales growth and 2022 guidance better than the street estimates, the P/EBITDA multiple will likely be revised upward, resulting in even higher levels for CAT stock.

While CAT stock has more room for growth, it is helpful to see how Caterpillar’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis 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 Caterpillar vs. Steven Madden.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Apr 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 CAT Return -3% 5% 133%
 S&P 500 Return -3% -8% 96%
 Trefis Multi-Strategy Portfolio -7% -14% 239%

[1] Month-to-date and year-to-date as of 4/25/2022
[2] Cumulative total returns since the end of 2016

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