Schaeffer's Top Stock Picks for '25

Caterpillar Options Bears Strike During Sell-Off

Analysts have yet to weigh in on Caterpillar earnings

Jan 28, 2019 at 10:07 AM
facebook X logo linkedin


The shares of Caterpillar Inc. (NYSE:CAT) are driving broad-market losses this morning, down 8.9% to trade at $124.71, and the worst stock on the Dow so far. The swing lower comes after the construction concern's disappointing fourth-quarter earnings report, with Caterpillar hinting at the negative impact of the U.S.-China trade war.

Looking at the specifics, Caterpillar reported fourth-quarter adjusted earnings of $2.55 per share, much lower than the $2.99 per share analysts were expecting. And while quarterly revenue of $14.34 billion arrived in-line with the consensus forecast, it said Asia/Pacific construction industry sales fell 4% year-over-year, citing "lower demand in China." CAT also said full-year per-share profit will arrive between $11.75 and $12.75, compared to the average estimate of $12.73.

Today's post-earnings move is likely catching several CAT bulls off guard. In fact, several options bulls appear to be closing out of their February 125 call positions in early trading today. What's more, a number of traders seem to be betting on this downside to continue through Friday's close -- a time frame that encompasses high-level U.S.-China trade talks in Washington -- with buy-to-open activity detected at the weekly 2/1 120-strike put.

Analysts, meanwhile, have yet to weigh in on CAT earnings, though there's certainly room for a round of downward revisions. While 10 of 17 analysts maintain a "buy" or better rating on the stock, the average 12-month price target of $152.15 is an 18% premium to current trading levels.

Looking at the charts, CAT stock had made a solid run higher off its late-December lows, but had found familiar resistance near $136 -- home to its Oct. 18 bear gap close. Plus, the shares recently rallied into their 160-day moving average, a trendline that's had historically bearish implications for the equity.

 
 

You have the chance to join one of Bernie's most exclusive programs, complete access at HUGE savings!

As we prepare for a new administration to take the reins in Washington, the near-term market landscape is rife with uncertainty.

The Federal Reserve has already hinted at the turbulence ahead, lowering its interest rate outlook for 2025.

Meanwhile, breakthroughs in artificial intelligence (AI), quantum computing, and other transformative sectors have unlocked incredible profit potential.

But these opportunities are fleeting, and timing is everything. That's where Quick-Hit Trader comes in.

Quick-Hit Trader is designed for precision and speed, getting you in and out of the market in a flash. While other investors scramble to navigate volatile conditions, you'll have access to expertly curated trades that leverage these rapid shifts to deliver explosive profits in short order.

This is your chance to capitalize on the fast-moving market like never before. Are you ready to make your move?