Caterpillar Stock Rebounds Magnificently After Getting Hit By Third Quarter Results

  • CAT shares fell more than 5% before fully recovering.
  • Caterpillar earned $5.17 per share in the third quarter on revenue of $16.1 billion.
  • A drop in equipment sales to end users pushed sales down year-over-year.
  • The outlook for the fourth quarter now looks less promising as management sees weakness in construction.

Caterpillar (CAT) is changing that sad face as they say. The construction and mining equipment maker has risen from an initial Wednesday morning sell-off of 5.2% to a slight gain just before lunch in New York.

The market has been largely strong in the midweek session after Alphabet’s (GOOGL) earnings Tuesday night fueled buying orders. The Dow Jones Industrial Average (DJIA) is up 0.5%, almost double the S&P 500 and NASDAQ at the time of writing.

Third-quarter US GDP came in below the expected 3.0% figure on Wednesday, coming in at 2.8%. However, ADP’s employment change report for October far exceeded consensus.

Caterpillar Stock News

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

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

Management also surprised shareholders by admitting weakness in its outlook for the fourth quarter. Full-year sales prospects are now likely to come in below senior management’s previous forecasts, with management attributing this to weakness in the construction industry.

Caterpillar Stock Chart

The main point to note is that CAT stock reached the support at $362 and bounced immediately. That $362 to $369 support region has been significant since it acted as resistance in March, April, May and June of this year. Given that CAT broke below but then rose above the 50-day SMA in Wednesday’s session, it would appear that the market has already priced in Q4 concerns.

For such a bad earnings report, CAT’s stock price seems safe. The recovery was so impressive that CAT is unlikely to lose its $362 support in the coming sessions. Although the Relative Strength Index (RSI) has been declining lately, CAT is expected to start consolidating here.

CAT Stock Daily Chart

Source: Fx Street

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