On Monday, October 22, 2012, Caterpillar (NYSE:CAT) will announce its third quarter earnings. The consensus analyst estimate has dropped from $2.27 a share to the current estimate of earnings of $2.21 a share.

In most situations, when earnings do not meet analyst estimates, a business' stock price will tend to drop. On the other hand, when actual earnings beat estimates by a significant amount, the share price will likely surge. SEE: Everything Investors Need To Know About Earnings

What to Expect: Caterpillar is expected to report $2.21 per share, up 14.5% from a year ago when the company reported earnings of $1.93 per share.

Three months ago, the consensus estimate was $2.41. Analysts are projecting earnings of $9.43 per share for the fiscal year.

Revenue is expected to exceed last year's figure of $15.72 billion by 6.8% and come in at $16.79 billion for the quarter. Revenue for the fiscal year is expected to come in at $67.76 billion.

Company Performance: Over the past four quarters, Caterpillar has reported double-digit revenue growth. It has risen by an average of 30.3%, with the biggest increase of 41.2% coming in the third quarter of the last fiscal year.

CAT's P/E ratio of 9.5 is under the industry average of 11.1. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: Understanding The P/E Ratio

The stock price has risen from $82.63 on July 19, 2012 to $84.96 over the past quarter. August 7, 2012 to September 5, 2012 marked one of Caterpillar's worst periods, as the share price fell $4.47.

The Competition: Caterpillar offers construction and mining equipment as well as diesel and natural gas engines and industrial gas turbines. Most analysts (11 of 21) give Caterpillar a hold rating.

The company's closest competitor in the constr. and agric. machinery industry is Deere (DE). Analysts are less optimistic about Caterpillar than about Deere. Nine out of 17 analysts rate the latter a buy compared to 10 of 21 for the former.

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Tickers in this Article: CAT

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