Caterpillar Earnings Surge, Crushing Views But Shares Reverse

Construction equipment giant Caterpillar (CAT) reported better-than-expected first-quarter earnings on Thursday. CAT stock gave up early gains.


The Dow Jones giant reported the results amid the pandemic-era housing boom and a rebound in demand for commodities — all of which could mean greater demand for Caterpillar’s construction and mining machinery.

Caterpillar Earnings

Estimates: Wall Street expected Caterpillar earnings to increase 21% to $1.93. Revenue was seen rising 4% to $11.05 billion.

Results: Caterpillar earnings surge 79% to $2.87 a share. Revenue grew 12% to $11.9 billion. That breaks a four-quarter string of declining earnings and six quarters for sales.

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CAT Stock

Shares fell 3.3% to 224.63 on the stock market today. In premarket trading, CAT stock had signaled a breakout from an ascending base with a 237.88 buy point. On a weekly chart, Caterpillar stock is in a flat base, also with that 237.88 entry.

The stock has been hovering close to record highs reached last month. But its relative strength line has faded since last month, when it also touched a new high. CAT stock has a 70 Composite Rating and a 58 EPS Rating.

Shares of construction and agricultural equipment maker Deere (DE) were down 1.5% Thursday.

The housing boom last year came after interest rates remained low due to the coronavirus pandemic, helping new construction, while the market for existing homes remained tight. As the economy rebounds, demand for commodities — and companies that help mine them — has rebounded as well.

When Caterpillar reported fourth-quarter earnings in January, it did not offer specific financial forecasts. During the company’s earnings conference call, it said it expected higher sales this year. But it said the pandemic made conditions difficult to measure.

Still, management said it saw construction in North America “benefiting from increased residential demand.” The company also cited expected demand for construction equipment in Brazil, and a strong selling season in China.

Caterpillar at the time also said business in heavy construction and quarry operations remained uncertain. But it expected the mining industry to continue to rebound.

“We anticipate most mined sites to continue operating with limited disruptions and high levels of truck activity,” CEO Jim Umpleby said on Caterpillar’s earnings conference call. “In addition, metal prices are supportive of reinvestment and quoting activity continues to be robust. The number of parked trucks continues to decline.”

Follow Bill Peters on Twitter at @IBD_BPeters.


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