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Resource Industries Segment to Drive Caterpillar's (CAT) Q4 Earnings
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Caterpillar Inc.’s (CAT - Free Report) Resource Industries segment’s fourth-quarter 2022 results are likely to reflect higher end-user demand for equipment and aftermarket parts, improved production levels as well as favorable price realization. Increased preference for Caterpillar’s autonomous mining equipment is also expected to have boosted the Resource Industries segment’s performance.
A Look Back at the Segment’s Q3 Performance
Caterpillar’s Resource Industries segment caters to customers using machinery in mining, heavy construction, quarry and aggregates. The segment accounted for around 22% of the company’s Machinery and Energy & Transportation (ME&T) sales. The Resource Industries segment’s total sales improved 31% year over year to $3.1 billion in the third quarter of 2022. The upside was driven by favorable price realization and elevated sales volume backed by high demand for equipment and aftermarket parts. Growth was noted across all regions, led by North America (66%) followed by Asia Pacific, EAME and Latin America with growth of 20%, 15% and 13%, respectively.
Favorable price realization and elevated sales volume helped the segment offset the impact of higher costs. This resulted in an 81% year-over-year surge in operating profit to $506 million in the third quarter.
Expectations for the Segment in Q4
Per the Federal Reserve, for the fourth quarter of 2022, total industrial production rose at an annual rate of 1.7% and the index for mining expanded at an annual rate of 0.7%. Even though commodity prices have been volatile in the quarter under review, miners’ increasing reliance on Caterpillar’s autonomous systems continued to gain traction.
Continued favorable end-user demand for equipment and aftermarket parts as well as higher prices are expected to reflect on the segment’s performance in the fourth quarter. Improvement in heavy construction, quarry and aggregates are also expected boost the segment’s top line. Pricing actions are expected to have offset the impact of higher costs in the quarter.
The Zacks Consensus Estimate Resource Industries segment’s fourth-quarter 2022 external sales is pegged at $3.2 billion, indicating growth of 21% from the year-ago quarter. The segment is expected to witness growth across all regions with the sales estimates for North America suggesting year over year growth of 32%, and that for Asia Pacific and Latin America highlighting growth of 15% each. The segment is expected to deliver 5% growth in sales in EAME. The consensus mark for the segment’s operating profit stands at $513 million, indicating a surge of 68% from the prior-year quarter.
Q4 Estimates for Caterpillar
The Zacks Consensus Estimate for Caterpillar’s fourth-quarter total sales is pegged at $15.9 billion, suggesting growth of 15% from the prior-year quarter. The consensus mark for earnings per share currently stands at $3.95, indicating an improvement of 47% from the last year. The quarterly results are likely to reflect higher demand in its Resource Industries segment as well as other segments. Click here to know how the company’s overall Q4 performance is expected to be.
Shares of the company have gained 30.3% in the past year, compared with the industry’s 26.6% growth.
Q4 Expectations for Peers
Terex Corporation (TEX - Free Report) , which provides aerial work platforms and materials processing machinery, is expected to witness year-over-year growth of 10.7% in revenues to $1.10 billion in fourth-quarter 2022. TEX currently carries a Zacks Rank of 3 and has gained 20.6% in a year’s time.
The Zacks Consensus Estimate for fourth-quarter 2022 revenues for CNH Industrial (CNHI - Free Report) is currently pegged at $6.31 billion, projecting a year-over-year decline of 30.5%. CNHI manufactures and sells agricultural and construction equipment. It manufactures quarry and mining equipment under the IVECO ASTRA brand. The Zacks Ranked #3 stock has gained 16% over the past year.
The Zacks Consensus Estimate for fourth-quarter 2022 revenues for Komatsu Ltd (KMTUY - Free Report) , which manufactures and sells construction, mining and utility equipment; and forest and industrial machinery, stands at $5.71 billion, indicating a year-over-year decline of 10.3%. KMTUY currently carries a Zacks Rank #2 (Buy). The stock has dipped 0.2% over the past year.
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Resource Industries Segment to Drive Caterpillar's (CAT) Q4 Earnings
Caterpillar Inc.’s (CAT - Free Report) Resource Industries segment’s fourth-quarter 2022 results are likely to reflect higher end-user demand for equipment and aftermarket parts, improved production levels as well as favorable price realization. Increased preference for Caterpillar’s autonomous mining equipment is also expected to have boosted the Resource Industries segment’s performance.
A Look Back at the Segment’s Q3 Performance
Caterpillar’s Resource Industries segment caters to customers using machinery in mining, heavy construction, quarry and aggregates. The segment accounted for around 22% of the company’s Machinery and Energy & Transportation (ME&T) sales. The Resource Industries segment’s total sales improved 31% year over year to $3.1 billion in the third quarter of 2022. The upside was driven by favorable price realization and elevated sales volume backed by high demand for equipment and aftermarket parts. Growth was noted across all regions, led by North America (66%) followed by Asia Pacific, EAME and Latin America with growth of 20%, 15% and 13%, respectively.
Favorable price realization and elevated sales volume helped the segment offset the impact of higher costs. This resulted in an 81% year-over-year surge in operating profit to $506 million in the third quarter.
Expectations for the Segment in Q4
Per the Federal Reserve, for the fourth quarter of 2022, total industrial production rose at an annual rate of 1.7% and the index for mining expanded at an annual rate of 0.7%. Even though commodity prices have been volatile in the quarter under review, miners’ increasing reliance on Caterpillar’s autonomous systems continued to gain traction.
Continued favorable end-user demand for equipment and aftermarket parts as well as higher prices are expected to reflect on the segment’s performance in the fourth quarter. Improvement in heavy construction, quarry and aggregates are also expected boost the segment’s top line. Pricing actions are expected to have offset the impact of higher costs in the quarter.
The Zacks Consensus Estimate Resource Industries segment’s fourth-quarter 2022 external sales is pegged at $3.2 billion, indicating growth of 21% from the year-ago quarter. The segment is expected to witness growth across all regions with the sales estimates for North America suggesting year over year growth of 32%, and that for Asia Pacific and Latin America highlighting growth of 15% each. The segment is expected to deliver 5% growth in sales in EAME. The consensus mark for the segment’s operating profit stands at $513 million, indicating a surge of 68% from the prior-year quarter.
Q4 Estimates for Caterpillar
The Zacks Consensus Estimate for Caterpillar’s fourth-quarter total sales is pegged at $15.9 billion, suggesting growth of 15% from the prior-year quarter. The consensus mark for earnings per share currently stands at $3.95, indicating an improvement of 47% from the last year. The quarterly results are likely to reflect higher demand in its Resource Industries segment as well as other segments. Click here to know how the company’s overall Q4 performance is expected to be.
Caterpillar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
Image Source: Zacks Investment Research
Shares of the company have gained 30.3% in the past year, compared with the industry’s 26.6% growth.
Q4 Expectations for Peers
Terex Corporation (TEX - Free Report) , which provides aerial work platforms and materials processing machinery, is expected to witness year-over-year growth of 10.7% in revenues to $1.10 billion in fourth-quarter 2022. TEX currently carries a Zacks Rank of 3 and has gained 20.6% in a year’s time.
The Zacks Consensus Estimate for fourth-quarter 2022 revenues for CNH Industrial (CNHI - Free Report) is currently pegged at $6.31 billion, projecting a year-over-year decline of 30.5%. CNHI manufactures and sells agricultural and construction equipment. It manufactures quarry and mining equipment under the IVECO ASTRA brand. The Zacks Ranked #3 stock has gained 16% over the past year.
The Zacks Consensus Estimate for fourth-quarter 2022 revenues for Komatsu Ltd (KMTUY - Free Report) , which manufactures and sells construction, mining and utility equipment; and forest and industrial machinery, stands at $5.71 billion, indicating a year-over-year decline of 10.3%. KMTUY currently carries a Zacks Rank #2 (Buy). The stock has dipped 0.2% over the past year.