Growth & Income: Caterpillar (CAT)

Caterpillar (CAT) experiencing strong demand from energy and mining customers in emerging markets. Caterpillar indicated that new orders remain above shipments to dealers. As a result, the company expects to increase production in the back half of 2010.

Caterpillar manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide.

Growth and Income

Analysts estimate that Caterpillar will grow its earnings per share 53.5% in 2010, 41.5% in 2011, and 14.0% per year for the long term. The stock has a dividend yield of 2.6%.

CAT is a Zacks #2 Rank stock that trades at 20.3x 2010 consensus estimates and 14.4x 2011 consensus estimates.

Second-Quarter Results

On July 22, CAT announced sales and revenues from financial services were up 31% year-over-year to $10.41 billion. The company earned $0.99 per share, beating the Zacks Consensus Estimate by 16.5%. Caterpillar has beaten the Zacks Consensus by an average of 230% in the last five quarters (30% in the last three quarters).

Management increased its full-year guidance. It now expects revenue of $39 billion to $42 billion with a midpoint of $40.5 billion and earnings per share of $3.15-$3.85 with a midpoint of $3.50.

Its previous guidance was revenue of $38 billion to $42 billion and EPS of $2.50 to $3.25.


It is still too early for the Zacks Consensus Estimates to reflect CAT’s recent results and updated guidance, but estimates are headed higher.

Currently, the Zacks Consensus for 2010 is $3.35, and the Zacks Consensus for 2011 is $4.73. The midpoint of the company’s updated 2010 guidance is $3.50, or $0.15 above the consensus. The consensus for 2010 will need to climb 4.5% to match company’s outlook.

Read the June 24 commentary on Caterpillar.

Last Week’s Growth and Income Zacks Rank Buys

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JB Hunt (JBHT) is expected to grow its EPS 39% in 2010, 31% in 2011, and 12% over the long term. This Zacks #2 Rank stock trades at 23x 2010 consensus EPS estimates and 18x 2011 consensus EPS estimates. Given its expected EPS growth over the next two years, its forward P/Es are reasonable. Click here to read more.

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About Rob Plaza 22 Articles

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