Caterpillar (NYSE:CAT) is set to announce its earnings on Wednesday, April 30, 2025. Historical records indicate a tendency for the stock to react unfavorably to its earnings announcements. Over the last five years, CAT stock has recorded a negative one-day return after its earnings release in 74% of the cases. The median negative return during these times was -3.0%, with the largest single-day decline being -7.0%. Separately, see META Stock Earnings: What’s The Trade?
The current consensus estimates predict earnings per share (EPS) of $4.35 on revenues of $14.58 billion for the upcoming quarter. This is lower than last year’s earnings of $5.60 per share on sales of $15.8 billion reported in the same quarter. Caterpillar’s sales are expected to be affected by reduced dealer inventory levels as overall demand continues to be subdued. This is likely due to high interest rates and a challenging inflationary environment.
For traders focused on events, assessing these historical trends could yield a trading advantage. There are two primary strategies: first, grasping the historical probabilities of various stock reactions after earnings to potentially position themselves before the earnings announcement. Second, analyzing the relationship between the immediate stock movement after earnings and its medium-term performance to guide trading actions following the release.
From a fundamental viewpoint, Caterpillar currently has a market capitalization of $147 billion. In the past twelve months, the company generated $65 billion in revenue, achieving $13 billion in operating profits and a net income of $11 billion. Ultimately, the actual market reaction to CAT’s forthcoming earnings will depend greatly on how the reported results measure up against these consensus expectations and overall market sentiment.
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CAT Stock Historical Chances of Positive Post-Earnings Return
Some insights on one-day (1D) post-earnings returns:
- There are 19 earnings data points recorded over the past five years, with 5 positive and 14 negative one-day (1D) returns recorded. In summary, positive 1D returns were observed about 26% of the time.
- Notably, this percentage rises to 36% if considering data for the last 3 years instead of 5.
- Median of the 5 positive returns = 4.1%, and median of the 14 negative returns = -3.0%
Additional data for observed 5-Day (5D), and 21-Day (21D) returns post-earnings are consolidated along with the statistics in the table below.
CAT Stock Correlation Between 1D, 5D, and 21D Historical Returns
A relatively less risky approach (though not applicable if the correlation is low) is to comprehend the correlation between short-term and medium-term returns following earnings, identify a pair that exhibits the highest correlation, and execute the relevant trade. For instance, if 1D and 5D display the greatest correlation, a trader can position themselves “long” for the next 5 days if the 1D post-earnings return is positive. Here is some correlation data based on a 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the relationship between 1D post-earnings returns and subsequent 5D returns.
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