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Caterpillar’s Q4 Revenue Expectations

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Caterpillar’s revenue expectations

Caterpillar (CAT) is expected to report revenues of $14.32 billion in the fourth quarter—an increase of 11.1% on a year-over-year basis. In the fourth-quarter of 2017, Caterpillar reported revenues of $12.9 billion.

If Caterpillar manages to meet analysts’ expectations, its fourth-quarter revenues will increase for the second consecutive year. From 2014 to 2016, Caterpillar’s fourth-quarter revenues were on a declining trend.

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Driving factors

In the previous quarter, all of Caterpillar’s reporting segments reflected growth. The trend is expected to continue in the fourth quarter as well. The company expects the demand in most end markets to continue. Caterpillar’s order rates and backlog will likely drive its fourth-quarter revenues. To offset the higher raw material cost and freight costs, Caterpillar has taken action to increase its product prices. As a result, in the fourth quarter, favorable price realization is expected to push the revenues up.

New product launches, which are expected to improve Caterpillar’s operating efficiency and help with cost savings, are also expected to drive the revenue growth. On the other hand, the stronger dollar could have a negative impact on Caterpillar’s revenue growth. The US Dollar Index, which measures the dollar’s movement against a basket of currencies, has gained 1.8% in the past six months.

Investors could hold Caterpillar indirectly by investing in the SPDR Dow Jones Industrial Average ETF (DIA), which holds 3.7% of its portfolio in Caterpillar. DIA also provides exposure to Boeing (BA), Goldman Sachs (GS), and 3M (MMM) with weights of 9.9%, 5.5%, and 5.3%, respectively, as of January 24.

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