On Jul 8, Zacks Investment Research upgraded
) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Caterpillar shares touched a 52-week high of $111.16 on Jul 3,
leading the Dow Jones Industrial Average, fueled by strong U.S.
Staying committed to its goal of delivering incremental returns
to shareholders, Caterpillar's board of directors approved a 17%
increase in its quarterly dividend in June, the highest percentage
increase since 2010. The hike also reflects its balance sheet
Caterpillar will now pay 70 cents per share to its shareholders
every quarter, 10 cents more than the prior dividend of 60 cents
per share. Caterpillar follows the likes of its competitors
Deere & Company
Joy Global Inc.
) both of which had announced dividend hikes in May this year.
Caterpillar delivered an impressive first quarter with earnings
increasing 22% to $1.61 per share despite revenues remaining flat
year over year at $13.2 billion. The company's incessant efforts to
cut down costs, continued deployment of lean manufacturing
initiatives and improvement in the Construction segment helped
mitigate the effect of lower mining-related sales on its
Caterpillar expects revenues in 2014 to be flat with 2013 or
move up or down in a 5% range. Caterpillar will benefit from
recovery in the U.S. construction sector, macroeconomic
stabilization in Europe, growth in the Chinese Excavator market and
a strong backlog.
Caterpillar also reported a backlog of $19.3 billion at the end
of the first quarter, up 7% year over year, driven by improvement
in Energy & Transportation, mainly locomotives. This marks a
reversal from the decline in backlog reported earlier.
Second quarter machinery results are expected to reflect the
improving macroeconomic environment. Both North American truck and
North American energy markets are showing signs of improvement
while a gradual recovery in the global construction market is also
expected to aid improvement of results.
Furthermore, Caterpillar has initiated extensive cost-saving
programs across its global businesses. The company will continue to
benefit from additional restructuring actions in 2014 to optimize
its cost structure and improve its operational efficiency.
The Zacks Consensus Estimate for earnings per share for 2014 is
currently pegged at $6.14 reflecting year-over-year growth of
6.85%. The expected long-term earnings growth rate for the stock is
Other Stocks to Consider
Another stock worth considering in the sector includes
) with the same rank as Caterpillar.
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