Yahoo Finance Will High Prices Benefit Caterpillar's (CAT) Q1 Earnings?
Caterpillar Inc. CAT is likely to register an improvement in both the top and bottom lines when it reports first-quarter 2024 results on Apr 25, before the opening bell.
Q1 Estimates
The Zacks Consensus Estimate for CAT’s total sales is $16 billion, suggesting growth of 1% from the year-ago quarter.
The consensus estimate for quarterly earnings per share for Caterpillar is currently $5.12, which indicates growth of 4.3% from the year-ago reported figure. The earnings estimates have moved up 0.4% in the past 30 days.
Q4 Results & Surprise History
In the last reported quarter, Caterpillar delivered improved year-over-year results in both revenues and earnings. Although CAT’s top line missed the Zacks Consensus Estimate, its bottom line beat expectations. This performance continued Caterpillar's streak of surpassing the Zacks Consensus Estimate in each of the past four quarters, delivering an average surprise of 19.7% over that period.
Caterpillar Inc. Price and EPS Surprise
Caterpillar Inc. price-eps-surprise | Caterpillar Inc. Quote
Factors to Note
In March 2024, the Institute for Supply Management’s manufacturing index was 50.3%, the first expansion in 16 months. The index reading was 49.1% in January 2024 and 47.8% in February. Also, the New Orders Index was 51.4% in March 2024, following 49.2% in February 2024 and 52.5% in January. This marked two months of expansion (with a reading of more than 50%) within the quarter.
The recent uptick in orders, coupled with the company's substantial backlog of $27.5 billion at the beginning of the first quarter, is anticipated to have contributed to Caterpillar’s top-line growth. Also, the easing of supply-chain issues is likely to have aided results.
The company has been witnessing higher costs for raw materials and freight services. However, there has been a moderation of input cost inflation lately. We expect the company’s cost of sales to decline 0.1% in the first quarter.
These gains are likely to have been offset by higher selling, general and administrative (SG&A) expenses due to increased incentive compensation and elevated research and development (R&D) expenses to support Caterpillar’s growth strategy. We expect SG&A expenses to increase 1.1% and R&D expenses to rise 2.2% in the first quarter.
Savings from Caterpillar’s cost-control measures and restructuring actions are likely to have negated some of these setbacks. Our model projects a modest 0.2% year-over-year increase in operating income to $3.4 billion and an operating margin of 21.1%, flat with the first quarter of 2023.
Segment Expectations
According to the latest update from the Federal Reserve, mining output fell at an annual rate of 12.3% in the first quarter. This was attributed to declines in oil and gas extraction, mining (except oil and gas), and support services for mining. We anticipate that Caterpillar’s Resource Industries segment will reflect this scenario in its first-quarter performance. Our model suggests that the segment's external sales will decrease 7.5% year over year to $3.1 billion. We expect a 10.9% decline in volume for the segment, partially offset by a 4.1% increase in pricing.
The Resource Industries segment is expected to report an operating profit of $696 million, suggesting a year-over-year 8.9% decline. The segment’s operating margins are projected to be 22.4%, lower than the first-quarter 2023 figure of 22.7% owing to lower volumes, partially offset by favorable prices.
We project the Construction segment’s external sales to be $6.8 billion, indicating growth of 0.9% from the year-ago quarter. We expect a 5.4% dip in volume in the quarter, which will be offset by 6.5% pricing growth.
The Construction segment’s operating profit is projected to be $1.8 billion, indicating year-over-year growth of 0.8%. The segment’s margins are projected to be 26.7%, flat with the year-ago quarter.
For the Energy & Transportation segment, the estimate for external sales is $5.3 billion, suggesting a 4% improvement from the prior-year reported figure. Volume growth is projected to be 4%, reflecting the solid demand across Oil & Gas, Power Generation and Transportation, offset by weak demand in industrial. Pricing is expected to contribute 2% to the segment’s sales growth.
The estimate for the segment’s operating profit is pegged at $1.1 billion for the first quarter of 2024, suggesting 3.8% year-over-year growth. Operating margin is projected at 20.9% in the first quarter, flat with the last year’s quarter.
What Our Model Unveils
Our model predicts an earnings beat for CAT this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is precisely the case here.
You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Earnings ESP: Caterpillar has an Earnings ESP of +0.38%.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Price Performance
Shares of the company have gained 61.1% in the past year compared with the industry’s 58.5% growth.
Image Source: Zacks Investment Research
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies with the right combination of elements to post an earnings beat in their upcoming releases.
Eaton Corporation plc ETN, expected to release earnings soon, has an Earnings ESP of +1.95%.
The Zacks Consensus Estimate for Eaton’s earnings for the first quarter of 2024 is pegged at $2.28 per share, indicating 21.3% year-over-year growth. It has a trailing four-quarter average surprise of 4.8%. ETN currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ingersoll Rand Inc. IR, scheduled to release its first-quarter 2024 results on May 2, has an Earnings ESP of +1.82% and a Zacks Rank of 2, at present.
The Zacks Consensus Estimate for Ingersoll Rand’s first-quarter 2024 earnings is pegged at 69 cents per share, which projects 6.2% growth from the year-ago quarter. IR has a trailing four-quarter average surprise of 15.9%.
Crane Company CR is scheduled to release its first-quarter 2024 results on Apr 22. It has an Earnings ESP of +0.28% and a Zacks Rank of 3, at present.
The Zacks Consensus Estimate for CR’s first-quarter earnings is pegged at $1.12 per share, which suggests a 10.4% year-over-year decline. It has a trailing four-quarter average surprise of 25.1%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Caterpillar Inc. (CAT) : Free Stock Analysis Report
Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
Ingersoll Rand Inc. (IR) : Free Stock Analysis Report
Crane Company (CR) : Free Stock Analysis Report
