Caterpillar Posts Mixed Q3 Results, Construction Sector Shines

Caterpillar Posts Mixed Q3 Results, Construction Sector Shines
October 29, 2021

Video Source: Yahoo Finance on YouTube

 

Earthmoving equipment manufacturer Caterpillar Inc (NYSE: CAT) reported mixed fiscal 2021 third-quarter results. While the earnings surpassed estimates, revenues missed the Street consensus. Two of the business segments – Construction and Resource – performed exceptionally well, paving the way for the earnings beat. The stock ended Thursday’s trading at $204.09, an increase of $7.96 or 4.06% from the prior close.

The Deerfield, Illinois-based company reported third-quarter revenues of $12.397 billion, an increase of 25.50% from $9.881 billion in the similar period last year. Specifically, sales of Machinery, Energy & Transportation products generated $11.707 billion, while financial products contributed revenues of $690 million.

The surge in revenue was led by higher sales volume, beneficial price realization, and the effect of changes in dealer inventories. In particular, dealers’ inventories fell by $300 million in Q3 2021.

For the quarter ended September 30th, 2021, the heavy equipment manufacturer posted a net income of $1.426 billion, or $2.60 per share, compared with $668 million, or $1.22 a share in the quarter ended September 30th, 2020.

Excluding restructuring costs and other expenses, the Q3 2021 adjusted earnings were $1.455 billion, or $2.66 per share, an increase from $832 million, or $1.52 a share in Q3 2020.

Analysts surveyed by Refinitiv had anticipated Caterpillar to report earnings of $2.20 per share on revenues of $12.48 billion.

Commenting on the quarterly result, Chairman and CEO Jim Umpleby said “Our third-quarter results reflect higher sales and revenues across our three primary segments and in all regions.”

Segment-wise,

  • The construction industry’s revenues rose by 30% y-o-y to $5.255 billion. The increase was led by higher sales volume and beneficial price realization.
  • Resource industries revenues were $2.406 billion, an increase of 32% on a y-o-y basis. Higher end-user demand for equipment and parts led to an increase in revenues.
  • Energy & Transportation revenues were $5.077 billion, up 22% from last year. Barring the power sub-sector, all other sub-sectors (oil & gas, industrial, and transportation) recorded growth.
  • Other segment revenues grew by 12% to $119 million.
  • Financial products revenues were $762 million in Q3 2021, reflecting a rise of 5% from the prior-year period.

The provision for income taxes was based on an estimated annual rate of 25% for Q3 2021, compared with 31% last year. During the third quarter, Caterpillar recorded a benefit of $39 million due to an amendment in the second-quarter tax rate of 26%.

The mixed quarterly results are expected to keep the stock of Caterpillar range-bound in the short term.

Technically, the stock has started rising after consolidating near 200. The stock has also closed above its 50-day moving average. Furthermore, the stochastics oscillator is out of the bearish zone. Therefore, we are anticipating the stock to rally in the days ahead.

cat - technical analysis- 29 October 2021

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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