CAT - Caterpillar sees higher earnings estimates at Citi on channel checks

Caterpillar ( NYSE: CAT ) is forecast to earn more than previously estimated by analysts at Citibank, based on their discussions with dealerships, suppliers and customers. Sentiment among the dealer network for the maker of heavy machinery “is positive entering 2023” amid concerns about the global economy, according to Citibank.

“Demand trends remain solid, and in many cases are out-running supply of new engines and machines,” Timothy Thein, analyst at Citibank, said in a January 5 report. “The stock’s recent outperformance has reduced the upside potential, but we would be buyers on pull-backs.”

Citibank raised its earnings estimates for Caterpillar ( CAT ) to $16.10 a share from $15.55 a share, compared with the First Call consensus of $15.18 a share and the Visible Alpha consensus of $15.29 a share, for 2023.

A key question is whether Caterpillar’s ( CAT ) stock has much room for gains compared with industrial peers. Caterpillar's ( CAT ) share price jumped 53% in three months -- from a year-low of $160.60 in late September to a 52-week high of $245.05 by late December on a strong Q3 earnings report.

“From a valuation standpoint, the stock does not appear to be stretched at least based on a relative basis versus the Industrial Select Sector SPDR ETF ( XLI ),” according to Citibank. “That said, the recent outperformance has put the stock close to levels in which it has faced resistance versus industrials in the past.”

Caterpillar will report Q4 2022 earnings before the market opens on January 31. Citibank estimates the company will report EPS of $4.04 for the December quarter.

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