Caterpillar stock (NYSE:CAT) is on fire this week, with shares of the Dow Jones Industrial Average component up 13.7% for the week as of 9:45 a.m. ET Friday, according to data from S&P Global Market Intelligence. As of this writing, the Dow was up around 3% this week.
Caterpillar is regarded as an economic bellwether because of its unrivaled position in the heavy equipment and mining sectors. Strong profits may therefore assist in alleviating some of the economy’s concerns.
Caterpillar Stock Market Analysis
Caterpillar (NYSE:CAT) not only reported fantastic third-quarter results that were easily above Wall Street expectations, but it also forecasted good sales growth and a “substantially” better adjusted operating profit margin for the fourth quarter.
The following are some notable figures from Caterpillar’s third-quarter earnings release (all changes are year over year):
Revenue increased by 21% to $15 billion.
Operating profit margin: 16.2%, up from 13.4% in the previous quarter.
Earnings per share increased 49% to $3.87.
Caterpillar’s top-line growth was driven by stronger sales volumes and pricing, with revenue growth in each of its categories — resource industries (mainly mining), construction industries, and energy and transportation — in the double digits. The company’s operating profit in the third quarter increased 46% year on year. Resource industries reported an 81% increase in earnings due to better pricing and larger sales volumes.
So, What Now?
Fears of a recession are making investors nervous about the possible demand for heavy equipment in the coming months. Caterpillar stock (NYSE:CAT), on the other hand, sees no signs of a slowdown.
Indeed, it expects to record its best quarterly sales for the year in the fourth quarter, owing in part to seasonality but also to significant sequential and year-over-year sales growth in all three sectors. Caterpillar’s margins might rise even more in the fourth quarter as a result.
Caterpillar’s solid set of stats and forecasts seem to have persuaded investors that the firm has the tenacity to weather any future storms, and they didn’t hesitate to gamble on the blue-chip stock this week. That is not an unreasonable expectation for a corporation that reached its margin objectives even in a year like 2020 when the pandemic significantly impacted its revenues.
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