Long -term Caterpillar(NYSE: CAT) Shareholders who have ever wondered what it is like to manage one of the bulldozers flagship of the company have probably been given a similar experience through the earth-moving returns of the shares in the past five years. Despite a volatile macro -economic environment, the industrial giant record wins has delivered its diversified global footprint and impressive strategic version.
On the other hand, the stock has gained a bump in the way and is currently under pressure, a decrease of approximately 16% compared to its 52 weeks high in the midst of some muted sales guidance for 2025. This sale represents a new purchase option to create Shares up, or is it a sign to dump the share before the soil caves caves?
Let’s discuss what we should do with shares of Caterpillar.
Caterpillar is recognized as the world’s leading manufacturer of construction and mining equipment, known for its iconic yellow heavy machines. The products of the company, including excavators, gigantic trucks, specialized engines and industrial energy systems, are considered essential in several industries and have a well -deserved reputation for sustainability.
A long history of innovation has continued with a great effort to integrate more high-tech functions and digital connectivity into the line-up. The strategy to introduce more autonomous options, electrified powertrains and even artificial intelligence (AI) options has contributed to the diversification of the company.
The impact was clear in 2024 when stepping in the direction of financial efficiency to support margins helped to push the full year of adjusted profit per share (EPS) by 3% to $ 21.90, which marked a business record. This was achieved, even when the total turnover decreased by 5% compared to 2023 to balance the weakness in the demand from China, in addition to mixed trends in North -American construction that are still related to high interest rates.
Image source: Getty images.
The prospects for 2025 remain slow, with management leading to a new decrease in the sale of the entire year. According to Wall Street analysts followed by Yahoo! Finance, 2025 EPS is expected to fall by 6.5% to $ 20.47.
Nevertheless, the larger collection meal is a sense of overall fundamental stability. Caterpillar still generates billions of free cash flow, where management is projecting optimism in its ability to return to profitable growth over time.
Investors who are convinced that the current headwind is just a bump in the way, have enough reasons to stay with Caterpillar as a blue chip supply for the long term. A scenario where macro-economic conditions may be the catalyst needed for the company to exceed expectations and to send the shares to a new of all time.
Metric
2024
2025 Estimation
Income (in billions)
$ 64.8
$ 63.5
Turnover growth (yoj)
(3.4%)
(2%)
Custom profit per share (EPS)
$ 21.90
$ 20.47
Custom EPS growth (yoj)
3.3%
(6.5%)
Data source: Yahoo Finance. Yoy = year after year.
Investors usually try to buy shares that present the improvement of prospects. In this case, the newest update from Caterpillar left a lot to be desired, at a time when the market is confronted with a new round of uncertainty.
Although details have not been confirmed, the proposed rates of the Trump administration about steel and aluminum have the potential to disturb the production chain of Caterpillar, mentioned during the income conference of the fourth quarter as a development that keeps a close eye on the company . The consequences can extend to the wider business environment if the customer’s question slows down as a response to an escalating trade war.
All this is against the background of the appreciation of Caterpillar. Caterpillar shares are traded at a forward price profit (p/e) ratio of 17 times its consensus 2025 profit per share, a level that corresponds to the five-year average for the winning field, with a period with stronger growth. An interpretation is that the stock can be overvalued with even more space to fall.
Investors delivered that Caterpillar can struggle for a longer period, because the prospects can consider selling the shares or at least avoid it.
Cat PE ratio (forward) data by Ycharts
There is a lot to be found in Caterpillar as the leader of the industrial sector who has proven itself more than is able to navigate various market cycles.
That said, I just don’t see enough good news to jump in and buy the stock with confidence for a rebound soon. The current shareholders can probably continue to hold the shares that look ahead to the next quarterly updates for signs of stronger trends. In the meantime, investors who are on the sidelines can currently find better opportunities elsewhere on the stock market.
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Then Victor has no position in the aforementioned shares. The Motley Fool has no position in one of the aforementioned shares. The Motley Fool has a disclosure policy.
Caterpillar shares: buying, selling or holding? was originally published by the Motley Fool
