Revenues of the manufacturer of industrial and construction machinery Caterpillar Inc. (CAT) are cyclical. Sales are currently at low levels, and the coronavirus pandemic has become an additional factor. Wall Street, however, is anticipating a return to growth in the first quarter of 2021.
During the COVID-19 pandemic, Caterpillar consumers faced a freeze in operations and uncertainty. Companies also had to reduce the expense of buying costly manufacturing, mining, utilities, oil and gas, and industrial machinery in some cases.
Caterpillar sells most of its goods to distributors who tend to limit sales of new equipment in such situations, selling off inventory. As a result, during the recession, Caterpillar’s company slowed down. However when dealers begin to replenish inventory, a rapid recovery will start.
The business would report a smaller decrease in demand from end users in the fourth quarter compared to the third quarter, according to Caterpillar management’s forecasts. This forecast is based on expected orders results. Overall, sales of Caterpillar had already increased in October and all end markets had a better result than in September. Moreover, sales improved for the fourth consecutive month in the main construction market.
Wall Street analysts also have an optimistic outlook for Caterpillar’s growth. In the fourth quarter, they expect revenue will bottom out and then turn positive year-on-year in the first quarter of 2021.
Thus at the moment, Caterpillar may be on the growth threshold. Moreover, with a yield of 2.31 percent, the business remains a successful dividend payer.
Caterpillar Inc. (CAT) stock though fell -1.92 percent to $178.71 on Monday, but was still up roughly 3 percent over the past 5 trading sessions. Performance of Deerfield, Illinois-based company’s over the past 6 months remained 33.18 percent while the value the stock has added since start of the year is more than 21 percent.