CA - Caterpillar: A Good Business At An Awful Price

2024-04-16 05:21:58 ET

Summary

• Caterpillar's earnings growth is projected to be uninspiring, with a compound annual growth rate of 3.3% between FY 2024 and FY 2026.
• I see good reasons for such uninspiring projections, due to concerns about geopolitical conflicts and China's softened demand.
• Yet, CAT stock is trading at a high valuation, with P/E and P/cash ratios far above historical averages.

Growth prospects

The chart below shows how uninspiring Caterpillar's ( CAT ) earnings growth is in the next 3 years according to analysts' expectations. As seen, its EPS is projected to grow at a compound annual growth rate ("CAGR") of 3.3% between FY 2024 and FY 2026. This translates to an EPS of $21.2 in 2024 to 23.36 in 2026. Then in 2027, a sizable decline is expected to bring its EPS back to $17.16....

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