Caterpillar Earnings Crush, But CAT Stock Tests Key Level As S&P 500 Futures Try To Rally

Caterpillar earnings delivered a huge positive surprise early Thursday, signaling the global economic backdrop remains solid as recession fears grow. CAT stock, an S&P 500 bellwether, initially jumped on the results but turned lower in volatile early stock market action. Still, S&P 500 futures pointed solidly higher.

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The earthmoving heavy-equipment giant, a Dow Jones component, so far doesn’t seem to feel growing headwinds for construction activity from the bank crisis. While Caterpillar didn’t offer specific guidance, it said Q2 sales should rise vs. Q1, in line with normal seasonality. The company said it expects “strong sales to users and no significant change in dealer inventory” this year vs. year-end 2022.

In an April 17 note, Deutsche Bank analyst Nicole DeBlase predicted an upside earnings surprise for Caterpillar. She cited her firm’s data on tracking worker activity at U.S. manufacturing sites.

Federal infrastructure spending, the Chips Act and the Inflation Reduction Act are expected to be major supports for nonresidential construction activity in the next few years. The key question is whether that support will offset soft housing and other nonresidential construction later this year and into 2024. Regional banks play an important role in commercial construction lending.

Caterpillar Earnings

Estimates: Analysts expected Caterpillar earnings per share of $3.80, up 32% from a year ago, on 12% sales growth to $15.25 billion.

Results: Caterpillar posted adjusted EPS of $4.91, up 70.5% from the year-ago $2.88. Revenue grew 17% to $15.86 billion, a modest deceleration from 20% growth in Q4.

Outlook: Caterpillar said adjusted operating profit margin is expected to be lower in Q2 than in Q1, in line with normal seasonality.

Going into earning, the recent trend for CAT earnings estimates had been higher, not lower. Analysts predicted EPS of $15.95 this year, up from 2023 estimates of $15.41 three months ago.

CAT Stock

In early Thursday stock market action, CAT stock fell 0.5% to 215 in volatile trade. Ahead of earnings, CAT stock had fallen close to its 200-day moving average, closing 0.4% above that level on Wednesday. A move below that key level would be a negative signal for the S&P 500.

Meanwhile, S&P 500 futures climbed 0.5%, attempting to avoid a third-straight loss. The S&P 500 lost 0.4% on Wednesday, following a 1.6% decline on Tuesday. Still, the S&P 500 is holding above its 50-day line, showing some resilience.

CAT stock’s big rally from the start of October to late January came as the industrial, materials and energy sectors led the S&P 500 rally off its bear-market low. CAT stock rallied more than 60% over that period. Meanwhile, the S&P 500 climbed 17% from its Oct. 12 closing low to its Feb. 2 rally peak.

Heavy-equipment rental firm United Rentals (URI) slightly missed earnings views late Wednesday. Although United Rentals did top sales estimates, URI stock fell 4.6% in early Thursday action.

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