Should You Pick Caterpillar Stock At $335?

Caterpillar Inc. (NYSE: CAT) has experienced a notable 7% increase in its stock value over the past week, contrasting with its competitor Deere, which has remained stagnant. This uptick follows Caterpillar's recently released Q2 financial results, which revealed revenues of $16.7 billion and earnings of $5.99 per share, slightly below revenue expectations but surpassing earnings forecasts. Despite the mixed results, analysts suggest that CAT stock is fairly valued at approximately $335 per share. Since early January 2021, Caterpillar's stock has surged by 95%, significantly outperforming the S&P 500's 40% increase during the same period. However, the company has struggled to consistently outperform the broader market, with returns of 16%, 19%, and 26% in 2021, 2022, and 2023, respectively. In comparison, the S&P 500 delivered returns of 27%, -19%, and 24% over those years, indicating that Caterpillar lagged behind in 2021. The analysis highlights the challenges faced by individual stocks in consistently beating the S&P 500, a trend observed across major players in the Industrials sector and tech giants alike. In contrast, the Trefis High Quality Portfolio has managed to outperform the S&P 500 annually during the same timeframe. Looking ahead, analysts estimate Caterpillar's valuation at $357 per share, based on a projected 16x P/E multiple for 2024 earnings. With mixed performance across its business segments, including declines in Construction and Resource Industries, investors may find it prudent to wait for a price dip before entering the market for potentially better long-term gains.