Banking

Industrial Giant’s Earnings More Than Double

Caterpillar (CAT) beat second-quarter estimates as demand for housing and commodities stays for robust while an infrastructure bill advances in Congress. CAT stock edged lower.




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Caterpillar Earnings

Estimates: Wall Street expected Caterpillar earnings to more than double to $2.41 per share, as the construction equipment giant laps the pandemic trough in the year-ago quarter. Revenue was seen growing 25% to $12.51 billion, according to FactSet.

Results: Caterpillar earnings shot up 152% to $2.60 a share. Revenue climbed 29% to $12.9 billion.

“We’re encouraged by higher sales and revenues across all regions and in our three primary segments, which reflect continued improvement in our end markets,” Caterpillar Chairman and CEO Jim Umpleby said in the earnings statement.

On an April earnings call, Caterpillar said it expects higher sales this year. But Umpleby also indicated that disruptions in the global supply chain, including the chip shortage, could make it tougher to meet recovering demand this year.

Then in June, Umpleby reportedly spoke of strong customer demand and better component availability despite the supply-chain pressures.

Outlook: Caterpillar continues to not offer specific financial guidance due to the pandemic. Analysts expect full-year 2021 earnings to jump 52% to $9.99 as sales grow 17% to $48.691.


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Caterpillar Stock

Shares of the Dow Jones industrial giant lost a fraction in early Friday stock market trading. CAT stock languished below a falling 10-week line after finding support at the 40-week line. There’s no buy point for now, according to MarketSmith chart analysis.

The relative strength lines for CAT stock and Deere (DE) are lagging. Their RS lines, the blue line in the chart shown, rallied in 2020. A rising RS line means a stock is outperforming the S&P 500 index.

Meanwhile, Caterpillar eyes a surge in the Delta variant across the U.S. and Asia. China accounts for 7% of Caterpillar’s revenue.

Offsetting, the Illinois-based company stands to benefit from a new $1 trillion federal infrastructure bill. On Wednesday, a bipartisan group of senators agreed to $550 billion in new spending.

The legislation would pour money to improve and extend the nation’s roads, bridges, airports, ports and waterways. Caterpillar earnings derive from sales of earth-movers and other heavy machinery to the construction, quarrying and transport markets.

Find Aparna Narayanan on Twitter at @IBD_Aparna.

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