Buy Caterpillar Stock Ahead of Earnings. Here’s Why.

Caterpillar

stock has had a rough year—rough enough that the stock could pop after it reports earnings on April 27.

Shares of the machinery manufacturer are down just over 7% in 2023 amid concerns about its profit outlook. Nearly three-quarters of Caterpillar’s (ticker: CAT) sales come from construction and energy customers, both of which will invest less in heavy equipment if those industries continue to slow. As a result of the decline, the stock now trades at just 14 times expected earnings per share for the next 12 months, almost half of its post-Covid peak of 26 times—known as a derating in Wall Street parlance—and below the S&P 500’s 18 times.