Irving, Texas-based construction and mining equipment-maker Caterpillar (CAT:NYSE) has always been regarded as something of a bellwether, not just for the state of the US economy but for the global economy, given its industry-leading position and its end markets.

However, dealers and stockists can often influence the top line depending on whether they are building inventory or reducing it, and that was readily apparent in the firm’s first-quarter earnings report.

Sales for the first three months of the year were down 10% to $14.2 billion due, with $1.1 billion of lower sales volumes caused by changes in dealer inventories and $250 million due to what the firm called ‘unfavourable price realisation’.

That meant the operating margin fell sharply to 18.1% against 22.3% in the first quarter of 2024, and EPS (earnings per share) were down 27% to $4.20 against $5.75 last year, marginally below the $4.30 consensus forecast.

With its second-quarter results due on 5 August, as well as the situation with inventories analysts will be closely watching what the firm has to say about the construction segment, as the mining and oil and gas businesses are expected to be relatively stable.

In anticipation of a better result, Shares has noticed half a dozen leading brokers have upgraded their share price targets for the stock.

Some, such as Baird, JPMorgan and Oppenheimer, have raised their targets quite significantly, from $445/share, $395/share and $395/share to $500, $475 and $483 respectively, so with the stock currently trading at $427 there is a fair degree of optimism being built in ahead of the release. 

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