Caterpillar gains in premarket after Q3 results beat expectations

Caterpillar (CAT.US), one of the world's leading manufacturers of heavy machinery, reported results for calendar Q3 2022 today ahead of the Wall Street session open. There was some concern that as the macroeconomic outlook is deteriorating and the global economy may be heading for a recession, machinery equipment producers like Caterpillar may see some business weakness, or at least signs of it. Let's take a quick look at results

Results top market expectations

Quick look at results

• EPS: $3.87 vs $3.18 expected ($2.87 in Q3 2021)

• Revenue: $14.99 billion vs $14.43 billion expected (+21% YoY)
  - Machinery, Energy & Transportation: $14.28 billion vs $13.98 billion expected (+22% YoY)
  - Financial revenue: $716 million vs $721 million expected

• Operating income: $2.47 billion vs $2.01 billion expected (+46% YoY)
  - Machinery, Energy & Transportation: $2.29 billion vs $1.91 billion expected
  - Financial revenue: $250 million vs $223.5 million

• R&D expenses: $476 million vs $484 million (+11% YoY)

Caterpillar reported better-than-expected results in almost every headline metric, spare for slight miss in R&D expenses. In spite of rising raw material prices, supply chain issues and overall increased macroeconomic uncertainty, the company reported hefty increases in EPS and revenue, with sales in its core business growing more than 20% year-over-year. Company also said that it has returned $2 billion to shareholders via stock buybacks and dividends.

Bellwether for the global economy

Caterpillars are often seen as a bellwether for the global economy. Due to its high market share in the equipment machinery market and use of its equipment in a number of key industries (i.e. mining and construction), any deterioration in Caterpillar's business often causes concerns over the condition of the global economy. Company, however, said that no such thing took place in this quarter and it continues to see strong demand in almost every end market it is in.

Stock gains 3% in premarket

Share price responded with a 3% jump in premarket. This means that it is highly likely that the stock will launch today's cash trading above the 200-session moving average, which was tested yesterday but bulls failed to break above it. This also means that the stock may clear a mid-term resistance zone ranging around $200.00 handle, that limited upward moves in July and August. A break above would pave the way for an extension of the current upward correction and a potential test of the $217 resistance in the near future.

Source: xStation5