Caterpillar (CAT) Surges 3.1%: Is This an Indication of Further Gains?

Caterpillar (CAT) shares soared 3.1% in the last trading session to close at $985.82. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 9.6% gain over the past four weeks.

Caterpillar shares have gained since it announced an 8% hike in its quarterly dividend to $1.63 per share. The latest hike reflects management’s confidence in its cash-generating capabilities and long-term growth prospects, while strengthening Caterpillar’s track record of rewarding shareholders through economic cycles. The increase marks Caterpillar’s 32nd consecutive year of dividend growth.

The company has paid a cash dividend every year since its formation and has distributed quarterly dividends since 1933. The revised annualized dividend of $6.52 implies a yield of 0.69%.

This construction equipment company is expected to post quarterly earnings of $6.19 per share in its upcoming report, which represents a year-over-year change of +31.1%. Revenues are expected to be $19.08 billion, up 15.2% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Caterpillar, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on CAT going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Caterpillar belongs to the Zacks Manufacturing - Construction and Mining industry. Another stock from the same industry, Astec Industries (ASTE), closed the last trading session 5.5% higher at $56.12. Over the past month, ASTE has returned 9.2%.

For Astec Industries, the consensus EPS estimate for the upcoming report has remained unchanged over the past month at $1.14. This represents a change of +29.6% from what the company reported a year ago. Astec Industries currently has a Zacks Rank of #5 (Strong Sell).

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This article originally published on Zacks Investment Research (zacks.com).

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