Look at segment results for example. Retail machine sales improved 33%, and revenue from resources industries jumped as much as 60% in the most recent quarter. While an energy price rebound drove 21% jump in the energy and transportation segment, construction industries witnessed a 27% growth. This is probably why the street keeps ignoring the current weakness in the industry, expecting an annual EPS of $9.15 per share, near the upper leg of the outlook range of $8.25 to $9.25 provided by the company.
Analysts also raised their outlook for 2019 earnings to $10.59 per share, 15% higher than what they expected three months back.
Caterpillar may not be able to pull out another 2017-like rally this year, but it sure has a lot of upside in 2018.
In a recent conference, Caterpillar management said it expects to take advantage of the higher construction prices driven by a weaker dollar and higher raw material costs, which it expects to continue.
The company also sees a lot of space for growth in the residential construction space, even though non-residential construction has hit a threshold for the current period. Apart from this, Caterpillar expects the mining industry to pick up this year driving higher parts sale for the company.
Though currently trading at $147, analysts feel the stock could rally up to $190 in the next one year, given a PEG ratio of just 0.8.