Caterpillar Q3 earnings on deck: What to expect

Caterpillar (NYSE:CAT) is scheduled to announce third quarter results on Wednesday, before markets open.

Wall Street expects the Texas-based heavy equipment maker to post quarterly EPS of $5.35, a 3.1% decline, while revenue is also expected to decrease 3.3% to $16.24B.

Caterpillar, which accounts for 18% U.S. construction market share in terms of units as per Morgan Stanley, said it anticipates Y/Y sales and revenues to decline in the second half due to decrease in resource industries dealer inventories during the year.

“While we have been cautious on U.S. non-residential construction activity all year long and increasingly cautious on Caterpillar earnings, we now see rising evidence of a potential de-stocking downturn for U.S. construction equipment,” said Morgan Stanley analyst Angel Castillo.

Castillo added that the brokerage sees even more risk of downward earnings revisions for Caterpillar, with 2025 EPS estimate now -10% below consensus.

During its Q2 earnings call, the company also estimated slightly lower construction industry sales in 2024 in North America and relatively low demand in China.

However, a recent Seeking Alpha analysis highlighted that central bank rate cuts and China’s significant stimulus package are expected to boost economic activity and CAT’s revenue growth.

“Earnings will be a short-term driver – I can’t say which way – but I don’t think they will change the fact CAT is a well-run company which is performing well in a challenging environment,” it added.

Jefferies, in October, also noted that the next growth cycle for the mining industry could double sales for Caterpillar’s resource industries segment and add $5 to $7 a share to the company’s earnings.

Seeking Alpha analysts, Wall Street and Seeking Alpha’s Quant Ratings recommended the company as a Hold.

Over the last two years, the company has beaten EPS estimates 88% of the time and has beaten revenue estimates 75% of the time.

Over the last three months, EPS estimates have seen eight upward revisions and nine downward. Revenue estimates have seen four upward revisions versus six downward moves.

Caterpillar, which makes machinery used in the construction, mining and oil and gas industries, has seen its shares jump over 30% in this year so far, outperforming the 22% gain in the broader S&P 500 index.