The stock price of Caterpillar (NYSE: CAT) has increased by 51% over the course of the past year, making it a fantastic year for investors in the company. On the other hand, the projections provided by management and the consensus of analysts on Wall Street indicate that it may be on the verge of surpassing a cyclical peak in terms of earnings and cash flow.
Estimates from Wall Street and optimistic cyclical outlooks As an illustration, the consensus on Wall Street is that Caterpillar's sales will increase by less than one percent in 2024, and that the company's earnings per share will be $21.27, which is an increase from $21.21 in 2023.
Due to the fact that investors frequently want to get out of a cyclical stock when the company's earnings momentum comes to a halt, estimates of this nature typically imply that the stock will experience difficulties.
Having said that, a Truist Financial analyst has lately begun covering the stock and has established a price target of $390 for it. If you believe the analyst's forecast, this indicates that the stock has a potential upside of more than fourteen percent over the next twelve months or so.
The analyst contends that the stock's profits potential will be increased as a result of infrastructure expenditure, which will be headed by the $1.2 trillion United States Infrastructure Investment and Jobs Act, as well as the ongoing transition to sustainable energy. Mining machinery for metals such as copper, which are necessary for electric vehicles and renewable energy, is one of the ways in which Caterpillar's equipment plays a significant part in the latter.
Additionally, the construction machinery that it produces contributes to the construction of the infrastructure that is required to link renewable energy to the grid.
As a result, Caterpillar has the ability to surpass the projections made by Wall Street until the year 2024, which would result in the market increasing its earnings predictions. This is a compelling argument, and in addition to the factors that were brought up earlier, reduced borrowing rates will boost the sales prospects of Caterpillar because of the increased demand.
Having said that, it is not the only cyclical stock that is available, and there may be other ways to invest on a contrarian stance that are more advantageous than purchasing a stock in a firm whose management has prepared investors for a slowdown in growth in 2024.
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