5 Analysts Discuss Key Takeaways from Caterpillar's (CAT) Analyst Day

May 18, 2022 6:40 AM EDT
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Caterpillar (NYSE: CAT) held its Analyst Day yesterday, where it announced that the board approved a new stock buyback program of up to $15 billion. The company also reiterated its long-term financial targets from the 2019 Analyst Day.

"Our global team has done an excellent job executing our strategy for long-term profitable growth," said Caterpillar Chairman & CEO, Jim Umpleby. "Since 2017, we've achieved our adjusted operating profit margin targets every year and generated $26 billion of free cash flow over that time. We remain committed to continuing our strong financial performance."

Here are comments from 5 Wall Street analysts.

Goldman Sachs’ Jerry Revich: “We come away from CAT's analyst day with a continued positive view of the company's (i) expanding TAM related to energy transition at attractive margins, (ii) accelerating cash returns to shareholders underpinned by strong cash flow, (iii) continued digital transformation driving service growth, and (iv) further scaling of CAT's best in class dealer network (location count up 25% in five years). We maintain our Buy rating on the stock relative to our outlook for a challenging cyclical outlook for our broader Machinery coverage, as we see scope for growth in Resource Industries and Energy & Transportation to balance an increasingly challenging Construction Industries outlook.”

Bank of America’s Michael Feniger: “Caterpillar (CAT)’s investor day lacked any near-term fireworks to drive immediate EPS increases. In our view, CAT’s investor day was broadly an extension of Jim Umpleby’s tenure as CEO – steady, consistent messaging around its strategy - profitable growth, expand services and sustainability, strong balance sheet, reaffirmed targets. In our view, CAT is evolving into a less cyclical, higher return, more shareholder friendly company.”

Morgan Stanley’s Courtney Yakavonis: “While we think investors had not expected meaningful target revisions at CAT's Investor Day, the lack of positively revised L-T margin guidance + a reiterated capital allocation framework suggest minimal changes to cycle-over-cycle EPS power, with impacts from the energy transition still a variable.”

UBS’ Steven Fisher: “We think investors should be pleased with CAT's analyst day messaging. We sense that expectations going into the meeting were low that CAT would provide a new financial framework, and we thought there was some risk that CAT's Services targets might be a bit optimistic from a timing perspective… The announcement of a new $15b buyback plan creates some additional long term EPS upside. We now think investors can look to potential for upwards of $21+ of EPS at $66b+ of revenues, which we think also has upside.”

Stifel’s Stanley Elliott: “We attended CAT’s analyst day and came away incrementally positive on the steps the company is taking to achieve its longer-term financial goals… We believe these actions can improve the financial profile of CAT over time by dampening cyclicality. Additionally, these moves will drive a higher return profile while increasing customer uptime and satisfaction.”

By Senad Karaahmetovic

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