Why Caterpillar (CAT) Stock Is Falling Today

NEW YORK (TheStreet) -- Shares of Caterpillar  (CAT) are down by 1.76% to $102.49 in mid-afternoon trading on Friday after the construction and mining equipment manufacturer issued a regulatory filing stating its year-over-year worldwide sales for the 2014 June to August period declined by 10%.

Caterpillar's sales fell as it faces a downturn in the mining industry, which has damaged demand for its equipment, the Chicago Tribune reports.

The company's sales by segment in the resource industries dropped 33% for the three months ended in August, compared to the same period in 2013, the Tribune added.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Prices for coal, iron ore, and other mined commodities have slipped as supply increased and demand from China and other emerging markets have relaxed.

Demand for Caterpillar's products are down as mining companies are increasing productivity in preexisting mines, instead of investing in expansions or opening new mines.

Separately, TheStreet Ratings team rates CATERPILLAR INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CATERPILLAR INC (CAT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and increase in net income. 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:

  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • CATERPILLAR INC has improved earnings per share by 8.3% 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 ($6.25 versus $5.75).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Machinery industry average. The net income increased by 4.1% when compared to the same quarter one year prior, going from $960.00 million to $999.00 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.0%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for CATERPILLAR INC is currently lower than what is desirable, coming in at 33.51%. Regardless of CAT's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 7.06% trails the industry average.
  • You can view the full analysis from the report here: CAT Ratings Report

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