What happened
Caterpillar (CAT 1.59%), one of the 30 Dow stocks, zoomed this morning and was up a solid 7.4% as of 11 a.m. ET.
Caterpillar is often considered a bellwether of the economy given its leadership in the heavy machinery, construction, and mining industries. So when a bellwether reports blowout numbers amid fears of a global slowdown, the markets are bound to react positively.
So what
Here are the key numbers from Caterpillar's second-quarter earnings report that was released this first day of August:
- Revenue: Up 22% to $17.3 billion.
- Operating margin: 21% versus 13.6% in the year-ago quarter.
- Earnings per share: Up 81% to $5.67 per share.
Caterpillar handily beat analysts' estimates with those numbers.
A deeper dive into Caterpillar's second-quarter numbers reveals strong demand across all its segments: construction industries, resource industries (primarily mining), and energy and transportation (E&T). Each of the segments reported double-digit growth in sales, driven by higher volumes and well as prices. E&T was the fastest-growing segment, with sales surging 27% year over year.
One of the biggest takeaways, though, is that all three segments reported their highest sales growth from North America. That means contrary to what many believe, manufacturing and construction activity is in full swing in the region, indicating a stronger-than-expected economy.
Now what
Caterpillar's outlook may leave investors a bit confused though -- despite a solid second quarter, the company foresees a sequential drop in sales and revenue in the third quarter.
Yet, Caterpillar should still be on track to exit 2023 on a strong note as it expects higher second-half sales, revenue, and adjusted operating margin versus last year. The other notable number is its backlog, which is headed in the right direction: Caterpillar's order backlog increased by $2.2 billion year over year, and about $0.3 billion sequentially.
