Caterpillar To See Margin Gains As Inventory Levels Normalize: Goldman Sachs

Caterpillar, Inc. CAT shares are trading higher today after the company reported second-quarter FY24 results. Goldman Sachs analyst Jerry Revich maintained a Buy rating with a price target of $408.

Total sales and revenue for the quarter declined 4% year-over-year to $16.69 billion, beating the consensus of $16.68 billion.

Caterpillar’s adjusted earnings were $5.99 per share, compared to $5.55 a year ago and above the consensus of $5.54.

Caterpillar anticipates 2024 sales and revenues to be slightly lower than 2023 (prior view: sales and revenues to be broadly similar), with the year-over-year decline in the second half being roughly similar to the first half.

The analyst anticipates the stock will rise following the results and says that the second quarter performance showed a margin beat driven by price increases, lower manufacturing costs, and solid progress in reducing dealer inventory.

According to the analyst, CAT destocked directionally in line with estimates in the quarter while beating on a sustained price/cost spread.

Following Komatsu’s mining and Volvo’s construction equipment updates, Revich noted expectations for orders were lowered going into the quarter.

The analyst estimates revenue of $64.66 billion in FY24, $69.69 billion in FY25 and $73.68 billion in FY26.

Investors can gain exposure to the stock via Global X Funds Global X Dow 30 Covered Call ETF DJIA and Global X Funds Global X Dow 30 Covered Call & Growth ETF DYLG.

Price Action: CAT shares are up 3.69% at $328.49 at the last check Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.