Caterpillar stock recovers magnificently after getting slammed for Q3 results

• CAT stock sinks more than 5% before recovering completely.
• Caterpillar earned $5.17 per share in Q3 on revenue of $16.1 billion.
• A downturn in equipent sales to end users pushed sales lower YoY.
• Q4 outlook now looks less rosy as management sees construction weakness.

Caterpillar (CAT) stock is turning that frown upside down as they say. The construction and mining equipment manufacturer has risen from an initial Wednesday morning sell-off of 5.2% to a slight gain just before lunchtime in New York.

The market has largely excelled in the midweek session after earnings from Alphabet (GOOGL) late Tuesday sent the buy orders into overdrive. The Dow Jones Industrial Average (DJIA) has risen 0.5%, nearly double the S&P 500 and NASDAQ at the time of writing.

Third-quarter US GDP undershot the 3.0% expected figure on Wednesday, coming in at 2.8%. The ADP Employment Change report for October printed sharply above consensus however.

Caterpillar stock news

Caterpillar underperformed the Wall Street consensus in the third quarter. The Irvine, Texas based company had adjusted earnings of $5.17 in the quarter, 3.5% below the $5.35 that Wall Street expected.

Revenue of $16.1 billion was $140 million below consensus and fell more than 4% from a year ago.

Management also startled shareholders by admitting weakness in their Q4 outlook. The full-year sales outlook is now likely to arrive below earlier C-suite forecasts, and management attributed this to construction industry weakness.

Caterpillar stock chart

The primary point to notice is that CAT stock reached support at $362 and immediately bounced off it. That $362 to $369 support region has been significant since acting as resistance in March, April, May and June of this year. Since CAT broke below but then climbed back above the 50-day Simple Moving Average (SMA) in Wednesday’s session, it would seem that the market has already discounted the Q4 worries.

For such a bad earnings report, the CAT stock price seems safe. The recovery was so impressive that CAT is unlikely to lose its $362 footing in the coming sessions. Though the Relative Strength Index (RSI) has been descending of late, expect CAT to begin to consolidate here.

CAT daily stock chart