Caterpillar: Why I’d Wait Before Adding To Existing Position (Rating Downgrade)

Summary:

  • Caterpillar Inc.’s most recent financial results surpassed estimates. However, key variables suggest that demand-side concerns have emerged.
  • Machinery, resources, and construction segments saw lower unit sales in Q2. Although energy and transportation sales have increased, the general systematic environment seems challenging.
  • A lower year-over-year backlog paired with stagnant cash conversion metrics are noteworthy considerations.
  • I don’t see enough in Caterpillar’s peer-based multiples and dividend attributes to suggest that the stock is undervalued.
A monarch caterpillar eating a large leaf

AttaBoyLuther/E+ via Getty Images

Caterpillar Inc.’s (NYSE:CAT) (NEOE:CATR:CA) stock is emphasized today as we revisit the industrial juggernaut’s prospects amid a changing economic environment. We last covered the stock in November 2022, stating it would be an outlier in the industrial sector. Although

Segment $ Sales (bn) $ Profit (bn)
Construction $6.7 (-6.9%) $1.741 (+3.6%)
Resources $3.2 (-11%) $0.72 (-2.97%)
Energy and Transport $7.3 (+1.4%) $1.525 (+20%)
Financial Products $1.004 (+8.8%) $0.227 (-5.4%)


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Kindly note that our content on Seeking Alpha and other platforms doesn't constitute financial advice. Instead, we set the tone for a discussion panel among subscribers. As such, we encourage you to consult a registered financial advisor before committing capital to financial instruments.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.


Leave a Reply

Your email address will not be published. Required fields are marked *