Why did not all investors like Caterpillar’s Report

Shares of heavy equipment manufacturer Caterpillar Inc. (CAT) after the report for the second quarter lost about 6% to $179.97 at auction on August 3. The company’s results are still strong, but not all investors were satisfied with the forecast. Is he that bad? Caterpillar’s revenue grew by 3% year-on-year to $668 million in the past quarter, and profit increased by 1% to $143 million. 

The company maintains a strong cash flow, which for the first half of 2022 amounted to $2.5 billion, secured a $1.1 billion share buyback and a $600 million dividend payment. Caterpillar expects continued revenue and profit growth in the current quarter. The adverse reaction of investors to Caterpillar’s message about a drop in demand for its equipment in Asia. The news about the complication of political relations between China and the United States led to a decline in Caterpillar’s quotes after the report. 

Nevertheless, Caterpillar management noted the continued high demand in North America, which makes it possible to compensate for the weakness of the European and Asian markets. To a greater extent, the negative assessment of the report was associated with an emotional reaction to other news is also evidenced by the fact that before the information, the shares showed positive dynamics. Caterpillar still has problems with supply chains, and new ones may appear in the coming quarters — with deliveries to China. 

However, Caterpillar’s business continues to operate successfully. Demand for construction machinery in the US remains steady, offsetting unforeseen costs in some markets. It should note that Caterpillar’s business is cyclical. It is associated with the periods of renewal of the heavy equipment fleet by construction and mining companies. Also, demand depends on economic cycles: it increases during growth in infrastructure costs.


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