Boston, MA 04/07/2014 (wallstreetpr) – Caterpillar Inc. (NYSE:CAT) traded sideways for the better part of the past 21 months, amid economic slowdown in the U.S. and globally. However, with economic recovery visible around the world, the company looks poised to move higher in the next couple of months, a trend that should continue through the end of 2015, according to analysts.
The company is the leading maker of earth-moving machines. It generated sales of about $52.6 billion in fiscal 2013. Note that was during the time the company faced reduced demand for its machines as the U.S. and international markets fell into economic recession. During the year, sales dropped by more than 15 percent and profit declined by about 33 percent. But the tide has changed in favor of the company and the future looks more promising than threatening.
Improving economic conditions
Most regions of the world are indicating economic improvement, and this is a primary reason why the next 12 – 18 months should result in considerable revenue and earnings increase. According to the latest manufacturing activity data in the U.S. and around the world, the month of March witnessed significant increase in manufacturing activities. And robust manufacturing activities are indicators of improving economic conditions.
Caterpillar Inc. (NYSE:CAT) is essentially a macroeconomic company, and this means that the company’s revenue, earnings and stock price are responsive to the worldwide economic changes. Such that when global economic condition improves, the company’s sales, profits and stock price rise. The opposite is true.
No cause for alarm over outlook
It may come as a little surprising why the management predicted lower revenue and earnings for the current year, at a time when analysts believe that the economic conditions are improving in favor of Caterpillar Inc. (NYSE:CAT). As for that, it is important noting that the company’s management is historically very conservative in their projections of revenue and earnings. The management projected that revenue in 2014 to be in the range of $56 billion, almost similar to the 2013 figure. And net earnings to drop to $5.30 per share diluted, from $5.75 per share diluted in 2013.
Investor takeaway
Caterpillar Inc. (NYSE:CAT) is a compelling long-term investment opportunity, entry at a price of $105 or below is a good opportunity to hold the stock.
