uploads///Caterpillar Resource Industries Q  Post

How Did Caterpillar’s Resource Industries Segment Perform in Q3?


Oct. 25 2018, Updated 9:01 a.m. ET

Resource Industries segment in Q3 2018

Caterpillar’s (CAT) Resource Industries segment is the smallest contributor to the company’s overall revenue. The segment had a revenue share of 19.5% in the third quarter. The segment’s revenue share increased by 2.4 percentage points on a YoY (year-over-year) basis. The segment reported revenues of $2.64 billion in the third quarter, which implies an increase of 34.9% on a YoY basis. In Q3 2017, the segment reported revenues of $1.96 billion.

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The segment’s revenue growth was driven by the continued demand for mining and heavy construction equipment. The increase in mining activity has pushed the demand for mining equipment. Resource industries clients seem to be looking to extend the life of their existing machinery, which resulted in higher aftermarket parts sales. Further, higher price realization also improved the segment’s revenue.

Segment’s profit and margin

The Resource Industries segment reported an operating income of $414 million in the third quarter compared to $229.0 million in the third quarter of 2017, an increase of 80.8% YoY. The segment reported an operating profit margin of 15.7% in the third quarter compared to 11.7% in the third quarter of 2017, an increase of 400 basis points YoY. The segment’s operating profit and margin increased due to the higher sales volume and better price realizations. Again, higher manufacturing and freight costs had an adverse impact on the segment’s profit and margin.

Investors can hold Caterpillar indirectly by investing in the SPDR SSGA Gender Diversity Index ETF (SHE), which has invested 1.8% of its portfolio in Caterpillar. The fund also provides exposure to Texas Instruments (TXN), Illinois Tool Works (ITW), and Johnson Controls (JCI) with weights of 2.3% 1.1%, and 0.7%, respectively, as of October 23.


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