Caterpillar’s Earnings Are Good and Sales Top Estimates. But the Stock Falls.

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Caterpillar

reported second-quarter numbers that beat Wall Street estimates. The stock, however, was falling early Tuesday. Investors are worried about slowing sales from Cat dealers.

Caterpillar

(ticker: CAT) reported $3.18 in adjusted per-share earnings from $14.2 billion in sales.

Wall Street was looking for about $3.03 in adjusted per-share earnings from about $14 billion in sales, according to Bloomberg. In the first quarter,

Caterpillar

reported a profit of $2.87 a share from sales of $12.9 billion.

Total sales include $708 million in revenue from Caterpillar’s financial unit. Wall Street was looking for $733 million.

Overall, it’s an earnings “beat,” but Caterpillar shares were down about 3.4% in premarket trading. S&P 500 and Dow Jones Industrial Average futures fell 0.6% and 0.5%, respectively.

There doesn’t seem to be a lot to complain about and management feels good about results.

“Our team delivered another good quarter with double-digit top line and adjusted profit per share growth despite ongoing supply chain challenges,” said CEO Jim Umpleby in the company’s news release. “Our second-quarter results reflect healthy demand across most of our end markets.”

Strong demand is a good sign. Unit volume was up as well as machinery pricing. And pricing more than offset rising costs. “Price realization was the highest in more than two years,” noted Cowen analyst Matt Elkott in a Tuesday report.

Backlog, the accumulation of orders from dealers, grew as well. Baird analyst Mig Dobre pointed Tuesday that backlog was at its highest level since the first quarter of 2012. “But interestingly, machine dealer sales declined 4% in the quarter,” added the analyst.

Cat sells to dealers and dealers sell to end customers. Investors appear a little worried that these retail sales are falling, but Caterpillar expects sales in the third quarter to grow. Wall Street is modeling a decline. The company also expects operating profit margins to improve in the second half of the year.

It’s a solid outlook. Based on the way shares are trading, investors are taking a wait-and-see approach.

 Options markets imply shares will move about 4%, up or down, following earnings. Shares have moved about 3%, up or down, on average following the past four quarterly reports, with one gain and three losses even though the company has earned more than expected each time.

As of the close of trading on Monday, Caterpillar shares have declined about 6% so far this year, better than the 14% and 10% respective declines of the S&P 500 and Dow Jones Industrial Average.

Write to Al Root at [email protected]