Will Caterpillar (CAT) Beat Estimates Again in Its Next Earnings Report?

Have you been looking for a stock that might be well-positioned to continue its earnings streak in its upcoming report? Consider Caterpillar (CAT), which belongs to the Zacks Manufacturing – Construction and Mining industry.

The construction equipment company has had a good streak of beating earnings estimates, especially when looking at the two previous reports. The average surprise over the last two quarters was 9.62%.

For the last reported quarter, Caterpillar showed earnings of $5.60 per share, compared to the Zacks consensus estimate of $5.12 per share, representing a surprise of 9.38%. In the previous quarter, the company was expected to post earnings of $4.76 per share and actually came out at $5.23 per share, representing a surprise of 9.87%.

With this history, there has been a recent favorable revision in earnings estimates for Caterpillar. In fact, the stock’s Zacks Earnings ESP (Expected Surprise Prediction) is positive, which is a great indicator of an earnings beat, especially when paired with its solid Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better deliver a positive surprise almost 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat consensus estimates could be as many as seven.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a revision of the Zacks Consensus definition that is related to revision. The idea is that the analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other contributors to the consensus had previously predicted.

Caterpillar currently has an Earnings ESP of +3.63%, suggesting that analysts have become bullish on the near-term earnings potential. When we combine this positive Earnings ESP with the stock’s Zacks Rank #3 (Hold), it shows that another beat is likely just around the corner.

However, investors should remember that a negative Earnings ESP reading does not indicate a failure to achieve profits, but a negative value reduces the predictive power of this indicator.

Many companies end up beating consensus EPS estimates, although that’s not the only reason their stocks appreciate. In addition, some stocks can remain stable even if they end up missing consensus estimates.

For this reason, it is very important to check a company’s Earnings ESP before its quarterly release to increase your chances of success. Make sure you use our Earnings ESP Filter to discover the best stocks to buy or sell before they are released.

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