Anticipating Caterpillar’s Earnings: Potential Stock Movements and Market Reactions

Caterpillar’s Earnings Report: Key Insights and Historical Trends

Caterpillar (NYSE:CAT) is set to report its next earnings on Wednesday, April 30, 2025. Historically, CAT’s stock has often reacted negatively to its earnings announcements. Over the last five years, the stock posted a negative one-day return 74% of the time following earnings releases, with a median drop of -3.0% and the largest decline being -7.0%.

Current consensus estimates indicate earnings per share (EPS) of $4.35 on revenues of $14.58 billion for the upcoming quarter. This projection is lower than last year’s quarter, which reported earnings of $5.60 per share on sales of $15.8 billion. Analysts expect that Caterpillar’s sales will decline due to reduced dealer inventory levels, stemming from soft overall demand. This soft demand can be linked to high inflation and elevated interest rates.

Analyzing Historical Patterns for Trading Strategies

Event-driven traders may find it beneficial to analyze past performance for potential trading advantages. Two main strategies emerge: first, traders can understand historical probabilities of different stock reactions post-earnings to position themselves before the announcement. Second, examining the immediate stock movement after earnings and its medium-term performance can inform subsequent trading decisions.

Caterpillar currently holds a market capitalization of $147 billion. Over the trailing twelve months, the company generated $65 billion in revenue, achieving operating profits of $13 billion and net income of $11 billion. The market’s reaction to Caterpillar’s upcoming earnings will be closely tied to how the actual results measure against these expectations.

Caterpillar’s Historical Odds of Positive Returns

Examining one-day (1D) post-earnings returns reveals:

In the last five years, there were 19 earnings data points, showing 5 positive and 14 negative one-day returns. This indicates that positive returns were observed about 26% of the time.
Interestingly, this percentage jumps to 36% when analyzing the last three years.
The median of the five positive returns was 4.1%, while the median of the 14 negative returns was -3.0%.

Further details on the 5-day (5D) and 21-day (21D) returns post-earnings can be found in the table below.

CAT 1D, 5D, and 21D Post earnings Return

Correlation Between Returns Over Time

A strategic approach involves examining the correlation between short-term and medium-term returns post-earnings. Traders may leverage this correlation to guide their trades. For instance, high correlation between 1D and 5D returns could suggest a “long” position for the next five days following a positive 1D return. Below is some correlation data based on both five-year and three-year histories.