Cater­pil­lar is Dow’s best per­form­ing stock, up 31% in 2016

Financial Mirror (Cyprus) - - FRONT PAGE -

The Dow Jones In­dus­trial Av­er­age topped 18,000 in mid-April and closed on Fri­day at 18,308.15, up 5.07% for the year to date. For the first nine months of 2016, the best per­form­ing stock among the Dow 30 has been Cater­pil­lar Inc. (NYSE: CAT), up 30.62% in 2016, nearly six times bet­ter than the in­dex in­crease.

The com­pany’s

per­for­mance

is

likely down to three main fac­tors. First, Cater­pil­lar’s div­i­dend yield at Fri­day’s closing price of $88.77 is 3.52%, trail­ing only Ver­i­zon and Chevron among the in­dex stocks. Sec­ond, the com­pany has been cut­ting costs. Third, the rise in de­mand for gold and other met­als has added some much needed de­mand for the com­pany’s prod­ucts. In late Au­gust, we looked at Cater­pil­lar’s per­for­mance in more de­tail.

When Cater­pil­lar re­ported sec­ond-quar­ter re­sults in late July, CEO Doug Ober­hel­man said: “De­spite a solid sec­ond quar­ter, we’re cau­tious as we en­ter the sec­ond half of the year. We’re not ex­pect­ing an up­turn in im­por­tant in­dus­tries like min­ing, oil and gas and rail to hap­pen this year.

“We’re con­tin­u­ing sig­nif­i­cant re­struc­tur­ing plans, which are de­signed to bring our cost struc­ture more in line with de­mand while main­tain­ing our ca­pa­bil­ity to quickly serve our cus­tomers when our busi­ness re­cov­ers.”

In that vein, the com­pany re­cently an­nounced that it is closing a plant in Bel­gium, elim­i­nat­ing 2,200 jobs. An­a­lysts, al­ways par­tial to re­struc­tur­ing that in­creases re­turns, have been kind to the com­pany by set­ting some pretty low hur­dles for earn­ings and rev­enues.

Cater­pil­lar’s mar­ket cap of $51.86 bil­lion ranks it 27th of the 30 Dow in­dex stocks. The con­sen­sus rev­enue es­ti­mate from an­a­lysts for the 2016 fis­cal year is $40.06 bil­lion, down nearly 15% year over year, and sink­ing to $39.54 bil­lion in 2017. Earn­ings per share are fore­cast to drop about 24% year over year, from $4.64 in 2015 to $3.50, re­main­ing es­sen­tially flat in 2017.

The stock closed at $88.77 on Fri­day, up 1.5% for the day af­ter post­ing a new 52-week high of $88.98.

The 52-week low is $56.36, and the con­sen­sus 12-month price tar­get is $74.41. (Source: 24/7 Wall St.com)

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