Caterpillar(US:CAT) ZACKS·2025-10-09 14:30Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Caterpillar (CAT), and suggests that while the average brokerage recommendation (ABR) indicates a buy, investors should be cautious and validate this with other tools like the Zacks Rank [1][5]. Brokerage Recommendations - Caterpillar has an average brokerage recommendation (ABR) of 1.99, which is between Strong Buy and Buy, based on recommendations from 23 brokerage firms [2]. - Out of the 23 recommendations, 12 are Strong Buy, accounting for 52.2% of all recommendations [2]. Limitations of Brokerage Recommendations - Solely relying on brokerage recommendations may not be advisable, as studies indicate they often fail to guide investors effectively towards stocks with high potential for price appreciation [5]. - Brokerage analysts tend to exhibit a positive bias due to their firms' vested interests, leading to a disproportionate number of favorable ratings compared to negative ones [6][10]. Zacks Rank as an Alternative - The Zacks Rank is presented as a more reliable tool, categorizing stocks from Strong Buy to Strong Sell based on earnings estimate revisions, which have shown a strong correlation with near-term stock price movements [8][11]. - Unlike the ABR, the Zacks Rank is updated more frequently, reflecting the latest earnings estimates and business trends, making it a timely indicator for future price movements [12]. Current Earnings Estimates for Caterpillar - The Zacks Consensus Estimate for Caterpillar's current year earnings has decreased by 0.1% over the past month to $17.91, indicating growing pessimism among analysts regarding the company's earnings prospects [13]. - This decline in earnings estimates has contributed to a Zacks Rank of 4 (Sell) for Caterpillar, suggesting caution despite the favorable ABR [14].