Caterpillar posted first-quarter results on Thursday that motored past earnings forecasts, but sales came in a touch light for the Dow Jones earthmoving giant. The report underscored CAT's improved margin performance, but shares slipped in early stock market action.
Another big force in the machinery space, United Rentals, posted a big Q1 earnings beat after Wednesday's close.
Caterpillar Earnings
Estimates: Analysts expected Caterpillar earnings of $5.14 per share, up 5% from a year ago, according to the FactSet consensus. Revenue was seen up 1% to $15.998 billion.
Results: Adjusted EPS jumped 14% to $5.60. Sales dipped about 0.6% to $15.8 billion. The rise in EPS reflected a 5% increase in adjusted operating profit and a smaller share count due to buybacks.
Outlook: Caterpillar said full-year revenue should be "broadly similar" to record 2023 results. That's in line with analyst views of a 0.2% rise to $67.2 billion. Q2 sales are expected to be lower than a year ago. The FactSet consensus has sales of $17.23 billion, down 0.5% from a year ago.
United Rentals Earnings
Estimates: United Rentals earnings were seen up 5% to $8.37. Revenue is expected to grow 4.8% to $3.44 billion.
Results: Adjusted EPS rose 15% to $9.15, as revenue climbed 6% to $3.485 billion.
Caterpillar's Extended Cycle
Caterpillar has two big things going for it. Most aspects of its businesses are thriving amid a $1-trillion federal windfall supporting manufacturing, mining and infrastructure projects. That funding has years to run and is part of the reason that Wall Street is fretting that high interest rates may be here to stay.
Additionally, the other thing Caterpillar has going for it is execution. On the Feb. 5 fourth-quarter earnings call, CEO Jim Umpleby said that Caterpillar was raising the top end of its outlook range for adjusted operating margin by 100 basis points at any given level of sales. CAT also raised its expected free cash flow range for its machinery, energy and transportation businesses to a range of $5 billion to $10 billion, up from $4 billion to $8 billion.
In an April 16 research report, JPMorgan raised its price target for CAT stock to 435 from 385, keeping an overweight rating. The firm highlighted Caterpillar's margin performance and expectations that earnings growth will accelerate in 2025.
Caterpillar Stock
CAT stock fell 4.1% to 348.56 early Thursday, after inching up 0.1% on Wednesday. Caterpillar finished just above its 21-day exponential average, while the Dow Jones dipped 0.1%.
A weekly MarketSurge chart shows that Caterpillar pulled back to its 10-week moving average last week, but had rebounded 2.5% as of mid-Wednesday. However, that key support now may be at risk.
Caterpillar's relative strength line, the blue line in IBD charts that tracks a stock's progress vs. the S&P 500, had climbed close to a 12-year high, a validation of its market leadership.
United Rentals stock rose 2.4% to 671 early Thursday. URI could make a run at its 50-day line, now around 678.
Shares are working on a 732.37 buy point from a 15%-deep consolidation. But URI stock could have an early entry with a decisive move above the 50-day line, which would also break a short downtrend.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
