Posted on December 10, 2018
By Michael Fitzsimmons, SeekingAlpha
Summary
- Along with Boeing, Caterpillar has been a poster child for the U.S./China trade dispute.
- But underlying sales and operating margins continue to be strong. Q3 EPS was a quarterly record $2.88/share and sales grew 19%.
- The recent sell-off has put shares solidly into undervalued territory, given the $13+/share cash hoard and $11.50 midpoint of adjusted EPS.
- The stock now yields 2.8% (about the same as the 10-year Treasury) and could easily run back to $150-160 on favorable trade news.
Caterpillar (CAT) appears to be vying with Boeing (BA) as the lead poster child for the on-going U.S./China trade entanglement. It is an understatement to point out that the stock is extremely volatile these days. Shares can drastically move up and down based on a single Trump-tweet or on simultaneously conflicting comments on trade by White House Economic Advisor Larry Kudlow and trade adviser Peter Navarro. I call it “management” by chaos. As a result, just this past week Caterpillar traded in a range of $141.39 to $122.75 – a whopping $18.64 range:
