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Why Caterpillar (CAT) Stock Is Down This Morning

Stocks in this article: CAT

NEW YORK (TheStreet) -- Shares of Caterpillar Inc. (CAT) are lower in pre-market trade as the manufacturer is facing no fewer than 15 lawsuits over allegations that engines for trucks, charter buses and school buses it sold between 2006 and 2010 were prone to regular breakdowns and in some cases caught fire, the Wall Street Journal reports.

Although the alleged flaws aren't known to have caused deaths or injuries, the suits are a potentially costly embarrassment for a company that regularly says the reliability of its products justifies premium prices, the Journal says.

Must Read: Warren Buffett's 25 Favorite Growth Stocks

 

TheStreet Ratings team rates CATERPILLAR INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CATERPILLAR INC (CAT) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CAT's revenue growth has slightly outpaced the industry average of 6.6%. Since the same quarter one year prior, revenues slightly increased by 0.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 26.69% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CAT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has increased to $1,897.00 million or 33.21% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -4.30%.
  • CATERPILLAR INC has improved earnings per share by 9.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CATERPILLAR INC reported lower earnings of $5.75 versus $8.49 in the prior year. This year, the market expects an improvement in earnings ($6.20 versus $5.75).
  • You can view the full analysis from the report here: CAT Ratings Report

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