Caterpillar: Bulldozing Its Way Higher For The Last 13 Months

Since the market meltdown ended last spring, Caterpillar (CAT) has been on an impressive upward trajectory. There have been 58 weeks of trading since the March ’20 low and in that time period, Caterpillar has only moved lower in 14 weeks. There was a three-week losing streak last April and there have been two two-week losing streaks over the last 58 weeks. That is a pretty impressive stretch.

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With the stock moving up so consistently, it’s not very surprising that a trend channel has formed since the low last spring. We see how the channel has helped define the trajectory of the rally with the lows over the past year connecting very neatly to form the lower rail of the channel. The upper rail isn’t as clean, but you get the idea of how it helps define the cycles.

The overbought/oversold indicators are interesting in that they have been in overbought territory for such long stretches. The stochastic indicators have been in overbought territory since last July. The 10-week RSI has been in overbought territory for most of the past six months and it has been above 60 since last August.

As for the daily technical indicators, the Tickeron Technical Analysis screener shows that Caterpillar has received bullish signals from its Momentum indicator and from its Bollinger Bands within the past week. It also received a bullish signal from the AROON indicator approximately three weeks ago.

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Earnings and Sales Have Slumped in Recent Years

One of the surprising things I found when I started analyzing Caterpillar was the fact that earnings and revenue have been declining. The company has seen earnings decline by an average of 7% per year over the last three years while sales have slumped by 3% per year over the same time period. Earnings declined by 22% in the most recent quarterly report and sales were down 15%.

The rally over the last year seems to be based more on the outlook for earnings and sales rather than the past results. Analysts expect earnings to jump by 21.3% for the first quarter while sales are expected to jump by 4.3%. For 2021 as a whole, earnings are expected to jump 27.1% while sales are expected to increase 13.6%.

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Disclaimer: Although our services incorporate historical financial information, past financial performance is not a guarantee or indicator of future results. Moreover, although we believe the ...

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