How did CAT's Q4 earnings surprise impact investor sentiment?

Caterpillar's (CAT) Q4 earnings surprise had a negative impact on investor sentiment, as evidenced by the following points:

1. **Missed Earnings and Revenue Estimates**: Caterpillar's Q4 earnings per share (EPS) came in at $0.08, which was a surprise of -3% as it missed the Zacks Consensus Estimate of $0.08. The company also reported revenues of $16.11 billion, missing the estimate of $16.35 billion, representing a surprise of -1.50%. This consistent underperformance against estimates led to investor disappointment.

|code|Ticker|Name|Date|EPS Surprise YoY|EPS Surprise|market_code|
|---|---|---|---|---|---|---|
|CAT|CAT.N|Caterpillar|20240331|-59.29203539823009|0.46|169|
|CAT|CAT.N|Caterpillar|20240630|-60.57692307692308|0.41|169|
|CAT|CAT.N|Caterpillar|20240930|-125|-0.19|169|
|CAT|CAT.N|Caterpillar|20241231|-83.33333333333333|0.08|169|

2. **Decline in Sales Volumes**: The Q4 performance was characterized by lower sales volumes in key segments such as Construction Industries and Resource Industries. This decline was attributed to reduced sales to end-users and changes in dealer inventories, which contributed to the negative sentiment surrounding the company's stock.
3. **Broader Market Impact**: The Q3 earnings report, which also missed estimates, had led to a 2.1% drop in Caterpillar's shares on the day of its release. The Q4 results continued this trend, reflecting investor concerns about the sustainability of the company's financial performance.
4. **Analyst Ratings and Price Target Adjustments**: Following the Q4 earnings miss, analysts downgraded Caterpillar from a "Moderate Buy" to a "Hold" rating, with some even assigning "Strong Sell" ratings. This shift in analyst sentiment further contributed to a negative perception of the stock.
5. **Historical Performance Context**: Caterpillar had a history of surpassing consensus EPS estimates in three of the previous four quarters. This recent failure to meet expectations was thus particularly disappointing for investors who had come to rely on the company's consistent performance.

In conclusion, Caterpillar's Q4 earnings surprise, which involved a notable miss of both earnings and revenue estimates, significantly dampened investor sentiment. The decline in sales volumes, coupled with the company's recent downgrade by analysts, created a challenging environment for the stock, leading to a negative reception from investors.