Caterpillar Q4 2018 earnings. What’s in the cards

Caterpillar (CAT) stock has tumbled 22% in the trailing 52-weeks period, battered by the US-China trade tensions. As the company reports its fourth quarter results on Monday, January 28, investors will be looking at how much the manufacturing giant has fended off these external threats.

Analysts’ consensus calls for Q4 earnings at $2.99 per share on revenue of $14.26 billion. This is much higher than last year’s earnings of $2.16 per share on revenue of $12.9 billion. Notably, the maker of mining and construction equipment is currently at a streak of seven back-to-back quarters of revenue and earnings growths, despite the headwinds.

During the last reported quarter, Caterpillar surpassed street estimates but investors were disappointed with the guidance projection. Shares dipped over 3% immediately following the announcement.

The company has been dogged by the material cost inflation stemming out of the metal tariffs that totaled $40 million in Q3. The tariffs are expected to be around $200 million for the whole of 2018. Caterpillar has also been hurt by its significant exposure to the Chinese market, which has been witnessing weakness lately.

To put things into perspective, the whole of the manufacturing industry has been crippled by the trade tensions in 2018. Caterpillar’s stock slump of 22% for the past 12 months is almost in line with the performance of the broader manufacturing industry, which has declined 23%.

Caterpillar stock dips on weak outlook

On the positive side, the manufacturing behemoth has strong order backlog, which stood at $17.3 billion at the end of the third quarter. Also, the company has been streamlining its operations and increasing its prices to beat the margin compressions. Q4 will drop more hints at how much these measures have been successful.

The stock currently has six Buy ratings and three Hold ratings. It has an average 12-month price target of $155, suggesting a 17% upside from the last close.

Get access to timely and accurate verbatim transcripts that are published within hours of the event