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Caterpillar put in a strong performance for the first half of 2023.

Caterpillar Generates
Impressive Results for First Half

Caterpillar (CAT) generated impressive results for the first half of 2023, writes analyst, Dominic Silva in a research report by The Value Line Investment Survey.

Value Line reported that sales of $17.3 billion surged past their $15.9 billion target, as the company's deep lineup of heavy equipment experienced strong demand from myriad end markets. The biggest included construction and mining.

“Volume gains were underpinned by efforts from end users, especially dealers, to replenish inventories. This, together with higher prices, mitigated the negative impact of increases in manufacturing costs, as well as SG&A and R&D expenses.

Adjusted operating profit margin approximated 21%, compared to approximately 14% in the year-ago period. Taking these factors together, Caterpillar registered better-than-expected earnings of $5.55 per share, which beat both our $3.80 call and consensus expectations.

The company will be hard-pressed to maintain momentum. Caterpillar expects to post favorable top- and bottom-line comparisons in the September period, but there is liable to be a sequential slowdown. This is partially due to the fact that inventories are back up to normal levels, which declined in recent quarters due to negative impact of supply-chain disruptions on production.

Other factors include a warning by CEO Jim Umpleby of softer business in China (citing weakness caused by the country's slowing construction market) and the potential slowdown in global economic activity, which could mitigate some of the strength reported in infrastructure spending.

All told, we are looking for a Notably, 75% of Caterpillar's construction sales in derived from the nonresidential arena, which is apt to show resiliency due to the Inflation Reduction Act and 2021 infrastructure law.

A recent surge in value has lifted Caterpillar shares, up 22% since our May report, to a record high. What's more, our proprietary ranking system suggests the stock (Timeliness: 1, Highest) will outperform during the next six to 12 months. Public spending remains a key catalyst. The 3 to 5-Year Target Price Range is $275.00 to $370.00.

However, investors looking for a capital goods company with good long-term prospects should look elsewhere, as the recent quotation discounts some of the earnings gains we project over the 3- to 5-year period.”

Editor’s Note: The Value Line Investment Survey features unique analysis on the most heavily-traded stocks on the North American exchanges, and five actively managed portfolios, updated weekly. For more information visit

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