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Caterpillar Hits 52-Week High: What’s Driving the Stock?

Zacks

Caterpillar Inc. CAT shares attained a 52-week high of $96.44 during intraday trading on Nov 25, finally closing lower at $95.81. The company has delivered a year-to-date return of about 40.98%. Caterpillar has a market cap of $56.06 billion. Average volume of shares traded in the last three months was approximately 5.11 million.

What's Driving Caterpillar?

The rise in Caterpillar’s share price seems to have been triggered by its monthly sales report for October and the victory of Donald Trump. Investors expect Caterpillar to gain from Trump's presidency, as he frequently stressed the need to rebuild America's crumbling infrastructure.

Caterpillar recently released its global retail sales for the three-month period ending Oct 2016, wherein sales fell 12%. Despite remaining in the negative territory, the decline rate has improved from the 18% dip in September, 17% in August and 19% in July. Asia Pacific remains a consistent bright spot with 13% increase in October, marking its eighth-consecutive month of growth and the best reading so far this year. During August, Caterpillar had witnessed the first positive overall reading in sales in Asia (2%) since Nov 2012. The momentum continued in September with a 3% growth and peaked to 12% in October.

The Architecture Billings Index, which is considered a leading indicator of U.S. non-residential construction, has remained above 50 in the recent months, signaling robust conditions ahead for the construction industry. As per Dodge Data & Analytics, total U.S. construction starts for 2017 will advance 5% to $713 billion, following gains of 11% in 2015 and an estimated 1% in 2016. The construction industry has now entered a more mature phase of its expansion and construction spending can be anticipated to see moderate gains through 2017 and beyond.

As sales continue to be hampered due to weak end markets, Caterpillar remains focused on reducing costs, such that the decline in operating profit is no more than 25–30% of the decline in sales and revenues.

CATERPILLAR INC Price and Consensus

CATERPILLAR INC Price and Consensus | CATERPILLAR INC Quote

Further, the company has delivered a positive earnings surprise of 8.53% in the recent four quarters. Caterpillar’s estimates for 2016 have gone up 0.3% in the past 30 days to $3.25. Caterpillar has an expected long-term earnings growth rate of 4.25%.

Caterpillar currently has a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same sector include ACCO Brands Corporation ACCO, EnerSys ENS and John Bean Technologies Corporation JBT . ACCO Brands Corporation witnessed a 4% increase in earnings estimates in the last 30 days. The company’s share price has surged 80.22% year to date and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EnerSys also sports a Zacks Rank #1 and its earnings estimates have also gone up 4% in the last 30 days. The EnerSys stock has gained 41.19% year to date. John Bean Technologies, another Zacks Rank #1 stock, has seen earnings estimates move north by 2%. Its share price has surged 84.03% year to date.

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