Caterpillar's Better-Than-Expected Results

Caterpillar's Better-Than-Expected Results

over 3 years ago2 mins

Hats off to Caterpillar: the US machinery maker reported better-than-expected third-quarter earnings on Wednesday, even as its sales and profits collapsed 🚜

What does this mean?

Caterpillar’s earnings fell 54% in the third quarter compared to the same time last year. That’s a pretty staggering drop, but credit where credit’s due: it’s an improvement on the company’s 70% second-quarter decline.

Caterpillar’s worth paying attention to because it’s an economic “bellwether” – that is, it’s a good way to gauge overall activity 🌎 Its machinery, after all, is more likely to be in high demand when the going’s good. And between the ongoing pandemic and the uncertainty around the US-China trade war, the going isn’t good. That’s why customers are holding off on buying Caterpillar’s gear. And while it did point out that demand for its smaller machines was improving, the manufacturer’s outlook for the future wasn’t enough to get investors to climb aboard.

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Why should I care?

There isn’t much the US presidential candidates agree on, but they’ve both argued they’ll make improvements to the country’s infrastructure – think roads, bridges, and railways 🛤 Investors see that as a sign that American industrial companies like Caterpillar could see a bump in demand after the US election – a possibility that’s pushed their stocks higher over the last few weeks.

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The closer we get to Election Day – and the louder the political chatter – the less influence company updates will have on stock prices 🇺🇸 As for after Election Day, it mightn’t much matter who’s in the White House: the three-month period until Inauguration Day has generally been uneventful for the stock market, and share prices tend to rise in an election year no matter which party wins. Then again, who knows? This isn’t exactly a normal year…

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