On Friday, Bernstein analysts, represented by Chad Dillard, revised the price target on Caterpillar stock (NYSE:CAT) to $360 from the previous $378 while maintaining a Market Perform rating. The $181 billion machinery giant, which according to InvestingPro maintains a "GREAT" financial health score, faces both positive and negative trends affecting its market position.
According to Dillard, Caterpillar's backlog demonstrated resilience, increasing by 9% year-over-year to $30 billion, with total equipment orders rising by 6% to $16 billion. This growth was primarily attributed to the Energy & Transportation segment, with some improvements in Resource Industries and flat performance in Construction Industries.
On the downside, Caterpillar is experiencing a rapid erosion in pricing, negatively impacting the price-to-cost ratio, particularly in the construction sector. The Machinery, Energy & Transportation (ME&T) pricing showed a slight decline, with Construction Industries pricing down approximately 5%. Dillard anticipates this pressure to persist through the first half of 2025 before conditions improve. Resource Industries pricing is also expected to decline, contributing to an overall negative price impact of 100 basis points for the equipment business in 2025.
Dillard forecasts that Caterpillar's earnings per share (EPS) for 2025 will be around $20, which is 10% lower than the consensus estimate. Additionally, the first quarter of 2025 is projected to see an EPS of $4.57, approximately 9% below the street's expectations. The analyst suggests a slow start to the year with potential for re-acceleration in the second half, and anticipates no further revisions to numbers due to price and cost pressures.
In conclusion, with Caterpillar shares trading near 20 times Bernstein's estimated EPS for 2025, Dillard advises that there is no immediate need for investors to pursue the stock aggressively at this juncture. This aligns with InvestingPro's Fair Value assessment, which indicates the stock is slightly overvalued at current levels. Investors seeking deeper insights can access comprehensive analysis and 7 additional ProTips through InvestingPro's detailed research report.
In other recent news, Caterpillar Inc.'s fourth-quarter results have prompted Citi to raise the company's stock price target from $420.00 to $430.00, maintaining a Buy rating. The revised projections include a decrease in the first-quarter 2025 adjusted earnings per share (EPS) estimate to $4.36 and the full-year 2025 adjusted EPS to $20.00. These adjustments are primarily due to lowered volume and margin assumptions for Caterpillar's Construction Industries (CI) and Resource Industries (RI) segments.
Simultaneously, UBS has raised Caterpillar's stock price target to $355, maintaining a Sell rating, citing a challenging first half of 2025 for the company due to adjustments in North American construction and a halt in oil and gas expansion.
In recent developments, Caterpillar's Chief Human Resources Officer Cheryl H. Johnson is set to retire in April, and Caterpillar Financial Services Corporation has successfully issued $1.25 billion in Medium-Term Notes.
On the analyst front, Evercore ISI downgraded Caterpillar's stock from 'In Line' to 'Underperform', citing potential earnings risks and competitive pressures, while DA Davidson raised its price target for Caterpillar to $350 from $337. Barclays (LON:BARC) maintained an Equalweight rating on Caterpillar, noting copper as a smaller but growing market for the company.
Despite a 4% year-over-year decrease in Q3 sales, totaling $16.1 billion, the company maintained a steady adjusted operating profit margin of 20% and an adjusted profit per share of $5.17.
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