Is Caterpillar Stock a Buy?
Construction, mining, and oil and gas may have been among the sectors hardest hit by the COVID-19 pandemic. Still, shares of leading equipment manufacturer Caterpillar (NYSE: CAT) aren't showing any signs of slowing down. The stock has nearly doubled from its March lows and is up 18% year to date.
Either Caterpillar is doing something right that's caught investor attention, or the market is pricing in the possibility of an economic recovery. The latter isn't unwarranted considering the positive signals the company's management gave during its latest quarterly earnings release. Does that mean the stock's a buy even at its current price?
Caterpillar relies heavily on its global dealership network for sales. During a slowdown, dealers typically work down their inventories rather than buy fresh equipment from Caterpillar, hurting Caterpillar's top line. During the nine months ended Sept. 30, 2020, dealers had reduced inventory by $1.8 billion. Caterpillar's sales in the energy and transportation category slumped nearly 27% to $28.4 billion during the period.
Source Fool.com
