Benzinga | Jan 28, 2021 10:06AM EST

Caterpillar's Earnings: A Preview

Caterpillar (NYSE:CAT) announces its next round of earnings this Friday, January 29. Here is Benzinga's look at Caterpillar's Q4 earnings report.

What Are Earnings, Net Income, And Earnings Per Share?

Earnings and especially earnings per share (EPS) are useful measures of a company's profitability. Total earnings, which is also referred to as net income, equals total revenue minus total expenses. EPS equals to net income divided by the number of shares outstanding.

Earnings And Revenue

Caterpillar EPS will likely be near $1.49 while revenue will be around $11.25 billion, according to analysts. In the same quarter last year, Caterpillar reported EPS of $2.63 on revenue of $13.14 billion.

Why Analyst Estimates And Earnings Surprises Are Important

Wall Street analysts who study this company will publish analyst estimates of revenue and EPS. The averages of all analyst EPS and revenue estimates are called the "consensus estimates"; these consensus estimates can have a significant effect on a company's performance during an earnings release. When a company posts earnings or revenue above or below a consensus estimate, it has posted an "earnings surprise", which can really move a stock depending on the difference between actual and estimated values.

The analyst consensus estimate would represent a 43.35% decrease in the company's earnings. Sales would have fallen 14.41% from the same quarter last year. Caterpillar's reported EPS has stacked up against analyst estimates in the past like this:

Quarter Q3 2020 Q2 2020 Q1 2020 Q4 2020EPS Estimate 1.12 0.64 1.69 2.37EPS Actual 1.34 1.03 1.60 2.63Revenue Estimate 9.80 B 9.38 B 10.92 B 13.41 BRevenue Actual 9.88 B 10.00 B 10.63 B 13.14 B

Stock Performance

Shares of Caterpillar were trading at $180.75 as of January 27. Over the last 52-week period, shares are up 38.64%. Given that these returns are generally positive, long-term shareholders can be satisfied going into this earnings release.

Do not be surprised to see the stock move on comments made during its conference call. Caterpillar is scheduled to hold the call at 08:30:00 ET and can be accessed here.