Caterpillar stock forecast as Q3 earnings smash expectations

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on Oct 28, 2021
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  • Caterpillar shares on Thursday gained more than 3% announcing its most recent quarterly results.
  • The company reported its fiscal Q3 revenue and earnings before markets opened, beating earnings estimates.
  • However, revenue for the quarter failed to match the Street forecast despite growing by more than 25% Y/Y.

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On Thursday, Caterpillar Inc. (NYSE:CAT) shares rallied 3.4% after reporting its fiscal Q3 results. The company announced its most recent quarterly results before markets opened, beating analyst expectations on earnings. However, revenue for the quarter fell short of estimates despite registering significant growth. 

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Caterpillar posted FQ3 non-GAAP earnings per share of $2.66, beating the consensus for analysts expectations of $2.21. In addition, its GAAP EPS of $2.60 outperformed the expectation of $2.20, while revenue increased by 25.3% from the same quarter a year ago to $12.4 billion, missing the Street forecast by $60 million.

Caterpillar shares are up 11.32% this year, thereby underperforming the S&P 500 index, which has gained more than 23%.

CAT’s exciting growth

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From an investment perspective, Caterpillar shares trade at reasonable trailing 12-month and forward P/E ratios of 25.43 and 16.21, respectively. In addition, analysts expect the company’s earnings per share to grow at an average annual rate of about 30.60% over the next five years.

Therefore, Caterpillar offers exciting growth prospects at reasonable valuation multiples. Moreover, its forward dividend yield of about 2.19% could gain the attention of dividend investors.

Source – TradingView

Technically, Caterpillar shares seem to have recently bounced back to avoid descending further. As a result, the stock has moved closer to the 100-day moving average, attempting a channel breakout.

Therefore, with shares still far from reaching overbought conditions, investors could target extended gains at about $212.73, or higher at $224.12. On the other hand, if the trendline resistance triggers a pullback, the stock could find support at about $192.19, or lower at $179.30.

It could be time to buy CAT shares

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In summary, although Caterpillar stock is up nearly 33% over the last 12 months, shares are yet to reach overbought conditions after a recent rebound.

Therefore, given the company’s exciting long-term growth and the current valuation multiples, it may be time to invest in CAT shares.

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