Shares of Caterpillar (CAT) skidded over 3% lower in pre-market trading on Thursday, January 30th, after the engineering equipment company missed on revenues again and offered up weak guidance for the coming year.
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The miss on the top line was offset by a slight beat on the bottom line, however investors seemed concerned that demand growth is slowing, profits in the quarter were down and the company missed revenue expectations for a fifth-straight quarter.
Fiscal fourth-quarter revenue declined 5% to $16.22 billion, below the consensus of $16.61 billion. Adjusted earnings per share (EPS) declined to $5.14 from $5.23, but beat the consensus estimate of $5.03.
Full-year profits at the mining- and construction-machinery maker were better, with adjusted profit per share in 2024 rising to a record $21.90, from $21.21 in 2023.
But the company, which is seen as a bellwether for the U.S. and global economy, warned that Fiscal 2025 sales would be “slightly lower” again. Uncertainty about the economic outlook around the world and U.S. trade policy under President Trump, as well as efforts to curb federal spending, may see end users delay machinery purchases after a strong performance off the back of President Biden’s $1 trillion infrastructure bill.
CAT Struggles vs Peers
CAT’s revenues misses have not stopped the shares from rallying almost 30% in the last 12 months after struggling following the COVID-19 pandemic. Since hitting a trough around September 2022, CAT stock is up around 140%.
Nevertheless, recent revenue misses stand out against peers in the heavy machinery sector. Lindsay (LNN) delivered revenue growth of 3.1% in its last quarterly update for the Fiscal first quarter of 2025, while Greenbrier (GBX) posted revenues up 8.3% to easily beat estimates. Both delivered strong EPS beats as well.
UBS analyst Steven Fisher raised his price target on CAT shares to $355 from $295 but kept a Sell rating on the stock ahead of the earnings. He argues that investors are too optimistic on the potential trough for Caterpillar shares.
In contrast, five-star BofA analyst Michael Feniger kept a Buy rating on the stock and last week raised his price target to $452 from $434.
Machinery beats will be tough to achieve this year as there is a lack of tightness in equipment, commodities and end markets excluding data centers, the analyst said. However, he suggested retaining some exposure as certain markets move back into balance, lead indicators “gradually perk up” and the story of 2025 ultimately shifts to “who can grow” in 2026.
Is CAT a Good Stock to Buy?
Overall, Wall Street has a Hold consensus rating on CAT stock, based on five Buys, five Holds and two Sells. The average CAT price target of $402.73 implies over 2% upside to the current level as the shares have risen 29% in the last year.
