Caterpillar (CAT) Stock Forecast for 2024, 2025, 2026. Sell or Buy?

The chart below shows the historical price of Caterpillar stock and a prediction chart for the next month. For convenience, prices are divided by color. Forecast prices include: Optimistic Forecast, Pessimistic Forecast, and Weighted Average Best Forecast. Detailed values for the Caterpillar stock price can be found in the table below.

Long-term forecasts by years.

Caterpillar Inc. is revolutionizing the industrial sphere with its cutting-edge construction and machinery operations, logistics integration, and service distribution. Apart from leveraging artificial intelligence in autonomous machinery, Caterpillar also stands out for its exceptional dividend growth, which spans years, as opposed to the industry average of two years—a whopping 1,350% difference.

Caterpillar’s consistency grade reveals some tempting valuation metrics. The company’s forward P/E sits at an appealing 14.66x when compared to the industry’s 19.53x. Its forward PEG also beats the industry average at 1.06x compared to 1.66x.

With heightened demand for construction equipment, CAT benefited from corporate restocks in the first half of 2023. As a global heavy machinery leader, Caterpillar will likely see a boost in sales growth as economies rebound and U.S. infrastructure spending climbs.

In the past 90 days alone, strong earnings exceeding predictions have triggered 24 FY1 upward analyst revisions. The second quarter reported an EPS of $5.55 that outrightly outperformed by $0.97 and revenues shot up nearly 22% year-over-year at $17.32 billion.

Company CEO James Umpleby shed light on CAT’s robust dividend growth grade and free cash flow performance during a recent Q2 earnings call.
He announced a healthy ME&T free cash flow of $2.6 billion collected during Q2 itself, wherein they returned $2 billion to shareholders—$1.4 billion via stock repurchase and $600 million through dividends.

Umpleby proudly stated an anticipated dividend increase of 8%, resulting in a quarterly dividend per share climbing by an impressive 51% since May 2019 when they launched their existing capital allocation strategy.

Caterpillar solidifies its stance as a dependable investment option with its commendable dividend scorecard which includes a 26.82% dividend payout ratio, superior B+ dividend safety grade, and a five-year growth rate of 8.9%. These promising facets make Caterpillar a worthy contestant for your investment portfolio inclusion.

The Reasons Why You Should Consider Buying Caterpillar

Caterpillar stands out as a solid investment choice, particularly because it boasts the status of a dividend aristocrat, with over 25 successive years of increasing dividends—a testament to its financial resilience. Despite its stock taking a hit and tumbling from nearly $300 down to about $226 in the past three months, savvy investors might see this as a buying opportunity, seeing that shares have since rebounded to around $246.

This company is a mainstay in the construction and mining sectors, known for manufacturing heavy-duty equipment that’s crucial for infrastructure development. Whether you pass by a construction site on your way to work or notice renovations at your local shopping center, there’s a good chance Caterpillar machinery is at the heart of these projects. With an ever-present demand for construction and development, Caterpillar’s foothold in supplying necessary equipment seems robust.

Considering this strong market position, it’s logical for an investor to consider Caterpillar as a potentially lucrative long-term bet. The pertinent questions remain about the company’s capacity for growth and its future outlook, but with its indispensable role in ongoing global development, Caterpillar appears well-positioned for enduring success.

Conservative Growth Outlook

Caterpillar has been growing earnings at a modest rate of around 3% a year, and despite a less rosy forecast compared to the last five years, they still favor the slow but stable progress. Overall financial metrics are ticking up slightly, with earnings and revenue expected to inch up by around 1.7% and 3.2%, while operating cash flow and free cash flow are looking at around 4% growth over the next couple of years.

Even though these numbers aren’t eye-popping, given the shaky economic outlook and potential recession on the horizon, this kind of growth is seen as commendable. What’s more, Caterpillar has surpassed expectations with a solid latest earnings report—sales are up 12%, profit margins have improved, and they’ve generated significant free cash flow while continuing to reward shareholders generously through buybacks and dividends.

Solid Financial Standing

One key aspect that labels a stock as top-tier is its robust financial health. By the conclusion of the recent quarter, Caterpillar (CAT) had an impressive $6.5 billion nest egg on hand, backed up by a sturdy interest coverage ratio. Plus, they’d stashed away an extra $4.3 billion in slightly longer-term liquid stocks to pump up returns on their cash reserves.

When matched against other market players, CAT flaunts one of the lowest net debt-to-EBITDA ratios at a minor 0.47x—well below competitors such as Cummins Inc. (CMI), and Deere & Co.(DE), both clocking in 1.10x apiece. Although CAT’s debt has seen a marginal uptick over the past years, the company has managed to keep its cash and debt balance steady.

Compared to its rivals, though, CAT does shoulder a significantly larger debt that might ruffle feathers among investors, especially considering the current high interest rate scenario. However, for a large-cap company with a fortified competitive advantage like Caterpillar, this is hardly cause for sleepless nights.

Official site of the company

Caterpillar last paid dividends on 10/21/2024. The next scheduled payment will be on 11/20/2024. The amount of dividends is $5.42 per share. If the date of the next dividend payment has not been updated, it means that the issuer has not yet announced the exact payment. As soon as information becomes available, we will immediately update the data. Bookmark our portal to stay updated.