Caterpillar shares jumped more than 5 percent Thursday and posted its best day since Nov. 30, 2011 after the heavy equipment maker reported better-than-expected earnings. The company also raised its 2014 guidance.
The industrial giant's blowout quarter may have come as a surprise to some investors, as Caterpillar is a widely recognized indicator of the strength of the global economy. Commodities, which often track the price of Caterpillar's stock, have been crushed of late. So, are Caterpillar's results a sign that all is well in the world, and should you buy the stock?
"I think [Caterpillar] does reassure investors for the U.S. economy," said Erin Gibbs of S&P Capital IQ, who believes Caterpillar is a buy and has it in several of her model portfolios.
"Caterpillar is a high quality name, with attractive earnings potential," said Gibbs. "[The company] is well positioned for taking advantage of U.S. oil growth and offsetting the global slowdown. As the global economy recovers it's in a great position to grow with that as well"
But there are always two sides to every story, and according to Jonathan Krinsky of MKM Partners, based solely on the charts, Caterpillar is a hold at best.
"We're a little cautious here," Krinskysaid. "If you look at a long-term chart, Caterpillar has been in a trading range of $80 per share on the downside, $115 per share on the upside. Right now we are in the middle of that range so the risk is about the same as the reward. That doesn't make it a compelling buy."
For a short-term investor, Krinsky added the stock is heading lower into year-end. "We think you sell it right here with a declining 50-day moving average holding as resistance overhead."