Caterpillar Inc. (CAT) has posted big surprises on estimates 3 out of the last 4 quarters. Analysts are bullish on 2010, with earnings expected to grow 29%.
Company Description
Caterpillar manufactures construction and mining equipment, industrial gas turbines and diesel and natural gas engines for customers worldwide. The company operates in three segments: Machinery, Engines and Financial Products.
Caterpillar Surprised Big in the Third Quarter
On Oct 20, Caterpillar surprised Wall Street by not just beating the estimate, but crushing it by 814.29%. Earnings per share were 64 cents compared with the Zacks Consensus of just 7 cents.
All was not completely rosy in the quarter, however, as revenues fell 11% to $676 million. Most of the decrease was due to a $77 million impact from a decrease in earnings assets, or finance receivables and operating leases at constant interest rates.
Caterpillar said it continues to see challenging economic conditions but it has access to liquidity.
Given the big beat in the quarter, it’s not surprising that analysts have raised their full year estimates. The 2009 Zacks Consensus jumped 56 cents to $2.04 in the last 60 days.
The company is expected to report fourth quarter results on Jan 25, 2010.
Growth
2009 has been a tough year for growth for Caterpillar. Earnings growth is expected to fall 64.01% compared with 2008. Analysts, however, see improvement in 2010 with earnings per share expected to jump to $2.65 per share from the 2009 Zacks Consensus of $2.04.
The long term outlook also show improvement. The company is forecast to grow earnings by an average of 10.67% over the next five years.
Income
Caterpillar currently pays a dividend that is yielding 2.90%. This is far higher than the industry average of 0.19%.
Fundamentals
Caterpillar is a Zacks #1 Rank (strong buy) stock. It has an excellent 1-year return on equity of 24.24%, well above the industry average of 8.11%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
