Is It Time to Go Long on Caterpillar?
The mining and construction equipment company Caterpillar Inc (NYSE:CAT) has seen its stock soar in 2014 following new developments that demand for its products has stabilized and could be on the rise. Shares have soared from around $80 to nearly $110 since December, but in looking ahead are there reasons to keep buying?
For 2014 Caterpillar is expected to create revenue of $56.2 billion and grow its top-line by 1 percent versus 2013. While this growth may seem insignificant, it’s a big step in the right direction for a company that has fundamentally suffered with low demand for its mining equipment, as pricing has had to become rather aggressive in the last year especially.
Yet, so far in 2014 pricing has been stable. Therefore, despite little revenue growth, flat in the first quarter, net profit growth has exceeded revenue at 4 percent. Thus, the consensus for full-year EPS has consistently risen in the last three months, from $5.93 to $6.21. This shows that Caterpillar’s strong start to the year has been more EPS-related versus revenue growth, although any improvements to revenue could be the catalyst needed to send shares higher.