Caterpillar digs deep for profits

Caterpillar will report its third-quarter figures on Thursday 23 October. The consensus is for revenue of $13.19 billion and earnings per share of $1.34.

Caterpillar logo
Source: Bloomberg

Caterpillar is trading at $95.04. The share price is down 12.6% since the company reported its second-quarter profits in July, in which revenue and EPS came in at $14.15 billion and $1.69 respectively. Analysts were expecting $14.5 billion and $1.52 — the stellar earning number was largely down to cost-cutting. Although the slowdown in the mining sector weighed on sales, the construction activity in North America picked up which has helped the demand for heavy machinery.

The decline in share price over the past two months was in line with the drop in metal prices, largely driven by weak economic data from China. Overnight, Beijing revealed that the economy grew by 7.3% in the third quarter. This was the slowest expansion in quarterly growth since early 2009 but it still managed to beat estimates. 

Equity analysts are bullish on Caterpillar. Out of the 29 recommendations, nine are buys and 20 are holds.

The boom-years from the mining industry are on the way out so cost-cutting would need to be kept up to offset the difference. Good results could drive the share price to $101.50, and if the company were to lower its full-year outlook the stock could drop to $88.


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