Shares of Caterpillar (CAT) declined in trading after the company reported disappointing Q3 results and adjusted its revenue outlook. The construction, mining, and engineering equipment manufacturer’s adjusted earnings declined by 6.3% year-over-year to $5.17 per share, which fell short of consensus estimates of $5.35 per share.
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What Is Driving the Decline in CAT’s Revenues?
The revenue shortfall was notable: quarterly revenue decreased by 4% year-over-year to $16.1 billion, underperforming Street estimates of $16.4 billion. This decline stemmed from a $759 million drop in sales volume, as demand for equipment among end users weakened.
In parallel, Caterpillar’s dealers reduced purchases in Q3 compared to last year’s pace. Inflation concerns and lower farm incomes have led dealers to adopt a more conservative approach to inventory management.
Reflecting these trends, North American sales fell by 4% year-over-year to $8.5 billion—North America being Caterpillar’s largest market, comprising over half of its Q3 sales.
CAT Adjusts Its Revenue Outlook
Looking forward, the company projects FY24 revenue to be “slightly lower” year-over-year due to evolving market dynamics. However, Caterpillar remains optimistic about maintaining its adjusted operating profit margin and earnings per share, aided by strategic price increases aimed at counterbalancing the sales dip.
Is CAT Stock a Good Buy Now?
Analysts remain sidelined about CAT stock, with a Hold consensus rating based on six Buys, six Holds, and three Sells. Over the past year, CAT has increased by more than 50%, and the average CAT price target of $377.69 implies a downside potential of 0.7% from current levels. These analyst ratings are likely to change following CAT’s results today.
