Caterpillar Q3 Earnings Preview: Will Rising Rates Weigh Down A Constructive Report?

Leading construction and mining equipment manufacturer, Caterpillar CAT, is set to report its third-quarter earnings before the market opens on Oct. 31.

Investors and analysts are keen to know whether the increase in infrastructure spending and the macro trends, such as transition to clean energy, are translating to CAT’s bottom line.

The stock serves as a barometer of the construction industry, commanding the leading global market share of 16.3% per Statista. Japan-based Komatsu KMTUY stands next with 10.7% market share and China-based XCMG is next at 5.8%.

Caterpillar Analysts Watch Closely

Caterpillar stands to benefit from key pieces of legislation. This includes the Infrastructure Investment and Jobs Act and the Revitalize American Manufacturing and Secure Critical Supply Chains per the Biden-Harris Plan. Add to it the rapid transition to clean energy, which is expected to provide a boost to mining activity around critical minerals.

Also Read: Renewables To Command 50% Of Global Power Mix By 2030: World Economic Outlook Report

Key risks include rising interest rates, inflation concerns and the volatile US PMI index.

Earnings Estimates: Wall Street analysts expect CAT to report $4.79 in EPS for the quarter and $$16.56BN in revenue, per Seeking Alpha data. Given Caterpillar’s history of beating estimates, the Street expects CAT to record a beat on EPS and revenue this time as well. Over the last eight quarters, CAT stock has delivered seven positive EPS surprises and six positive revenue surprises.

Per consensus estimates of 27 analysts, Caterpillar is expected to report $20.01 in EPS for the fiscal year ending December 2023 (representing a 44.55% year-on-year increase). Revenue estimates for the said period stand at $66.79BN currently (12.29% YoY growth).

Analyst Ratings & Price Targets: Wall Street analyst ratings (based on a pool of 120 analyst firms over the last 12 months) currently rate the stock a Buy. Consensus price target stands at $243.11 a share.

Price Action: Caterpillar shares are trading at around $250/share, down ~9% over the past month. The 52-week range is a low of $194.57 and a high of $293.88.