Caterpillar equipment is parked on a lot at Peterson Tractor Co. in San Leandro, California.
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Stock in the industrial- machinery giant Caterpillar is rising after the company reported better-than-expected third -quarter numbers. The clean, solid earnings “beat” should help Cat stock recover some recent losses.
The numbers also show that maybe current inflation doesn’t have to kill the golden goose. Inflation has caused industrial stocks to trail behind the market in recent months, but if demand is strong, profits can still rise..
Caterpillar (ticker: CAT) shares were up 3% in premarket trading to $202, while futures on the S&P 500 and Dow Jones Industrial Average were up 0.3% and 0.2%, respectively.
Caterpillar reported $2.66 in adjusted per-share earnings from $12.4 billion in sales. Wall Street was looking for $2.20 a share from $11.8 billion in sales.
“Our global team continues to execute our long-term strategy for profitable growth while working to mitigate supply chain challenges as we serve our customers,” said CEO Jim Umpleby in the company’s news release. “Our third-quarter results reflect higher sales and revenues across our three primary segments and in all regions.”
Construction-machinery sales grew 30% year over year. Mining and energy- related sales jumped 32% and 22%, respectively. Both higher unit sales volumes and prices helped to lift revenues.
Operating profit came in at $1.7 billion, up from $1 billion reported in the third quarter of 2020. Profit margins improved to 13.4% from 10% despite higher manufacturing expenses resulting from increasing costs for labor, freight, and raw materials. Every business, these days, seems to be dealing with those three things, but rising demand helped Caterpillar offset them all.
Cat Financial earned $101 million in the quarter, up 110% year over year. Past-due balances dropped year over year. The lending operation’s results were solid as well.
Management has scheduled a conference call for 8:30 a.m. Eastern time to discuss the results. Investors and analysts will be looking past the strong third quarter, wanting clues to how 2022 is shaping up.
Coming into Thursday trading, Cat stock is 8% so far in 2022. That lags behind the comparable 21% gain of the S&P. Most of the underperformance has come in the past three months, as inflation fears and supply chain woes weighed on stocks. Cat stock is down about 7% over the past three months. The S&P has added 3% over the same span.
