Caterpillar Inc. (CAT) has recently been on Zacks.com's list of the most searched stocks. Therefore, you might want to consider some of the key factors that could influence the stock's performance in the near future.\n\nShares of this construction equipment company have returned +11.5% over the past month versus the Zacks S&P 500 composite's +3.6% change. The Zacks Manufacturing - Construction and Mining industry, to which Caterpillar belongs, has gained 12.4% over this period. Now the key question is: Where could the stock be headed in the near term?\n\nAlthough media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.\n\nRather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.\n\nOur analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.\n\nFor the current quarter, Caterpillar is expected to post earnings of $4.88 per share, indicating a change of -18.5% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.6% over the last 30 days.\n\nThe consensus earnings estimate of $18.79 for the current fiscal year indicates a year-over-year change of -14.2%. This estimate has changed +0.5% over the last 30 days.\n\nFor the next fiscal year, the consensus earnings estimate of $21.39 indicates a change of +13.8% from what Caterpillar is expected to report a year ago. Over the past month, the estimate has changed +1.4%.\n\nWith an impressive externally audited track record, our proprietary stock rating tool -- the Zacks Rank -- is a more conclusive indicator of a stock's near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #3 (Hold) for Caterpillar.\n\nThe chart below shows the evolution of the company's forward 12-month consensus EPS estimate:\n\n12-month consensus EPS estimate for CAT \n\nProjected Revenue Growth\n\nEven though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.\n\nFor Caterpillar, the consensus sales estimate for the current quarter of $16.35 billion indicates a year-over-year change of -2%. For the current and next fiscal years, $63.22 billion and $66.51 billion estimates indicate -2.5% and +5.2% changes, respectively.\n\nLast Reported Results and Surprise History\n\nCaterpillar reported revenues of $14.25 billion in the last reported quarter, representing a year-over-year change of -9.8%. EPS of $4.25 for the same period compares with $5.6 a year ago.\n\nCompared to the Zacks Consensus Estimate of $14.54 billion, the reported revenues represent a surprise of -2.01%. The EPS surprise was -1.16%.\n\nOver the last four quarters, Caterpillar surpassed consensus EPS estimates two times. The company topped consensus revenue estimates times over this period.\n\nValuation\n\nWithout considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.\n\nComparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.\n\nAs part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.\n\nCaterpillar is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.\n\nConclusion\n\nThe facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Caterpillar. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.\n\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\n\nCaterpillar Inc. (CAT) : Free Stock Analysis Report\n\nThis article originally published on Zacks Investment Research (zacks.com).

Caterpillar Inc. (CAT) is Attracting Investor Attention: Here is What You Should Know

The article analyzes Caterpillar Inc.'s (CAT) stock performance, earnings projections, revenue growth, and valuation metrics. It highlights recent earnings changes, revenue trends, and the company's Zacks Rank #3 (Hold) based on analyst estimates and financial indicators.