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Caterpillar’s Q3 Revenue Continued Upward Trend

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Caterpillar third-quarter revenues

Caterpillar (CAT) reported revenues of $13.51 billion in the third quarter, an increase of 23.7% on a YoY basis. In the third quarter of 2017, Caterpillar reported revenues of $11.41 billion. Caterpillar’s revenues managed to beat analysts’ estimate of $13.28 billion. The third-quarter revenue continued its upward trend, rising for the second consecutive year.

Caterpillar’s revenue growth was primarily driven by higher volume growth in all of the three major reporting segments. Further, Caterpillar’s decision to increase product prices to overcome the increase in raw material prices helped the revenue to grow. However, the strong dollar had an adverse impact on CAT’s revenue. The Brazilian real and the Australian dollar were weaker than the dollar.

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Management comments

Jim Umpleby, CEO of Caterpillar, said, “This was the best third-quarter profit per share in our company’s history. Our global team continues to do excellent work focusing on our customers’ success and executing our strategy for profitable growth.”

Outlook

Caterpillar expects the demand conditions to continue in most of its end markets. The backlogs and order rates are seen as healthy.  Further, the price realizations could contribute to the revenue growth. However, the unfavorable foreign currency could have an adverse impact.

Investors can hold Caterpillar indirectly by investing in the Industrial Select Sector SPDR Fund (XLI), which has invested 3.2% of its portfolio in Caterpillar. The fund also provides exposure to Lockheed Martin (LMT), Deere (DE), and Illinois Tool Works (ITW) with weights of 3.7%, 2.1%, and 1.7%, respectively, as of October 23.

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