Caterpillar’s Q4 results indicate challenging 2022 for global construction

Ghost City in China...

The equity market is a leading economic indicator as investors make their real time buy/sell decisions based on factors that will influence the financials of companies in the future. The historic performance of the stock market is often a poor guide for upcoming results. As Warren Buffet once said, “In the business world, the rear-view mirror is always clearer than the windshield.”

However, the quarterly results reported by companies provide starting points and indicate trends not only for their own performance, but also for their sectors, industries and sometimes economies overall. In most cases, strong revenue and earnings announcements in quarterly reports push share prices to higher levels. However, in some situations, the markets disregard sales and income numbers and concentrate on other seemingly more important indicators.

This was the case with Caterpillar, which reported 2021 Q4 financial results on Jan. 28. Even though the company’s quarterly earnings per share and sales revenues exceeded expectations (EPS of $2.69 and revenue of $13.8 billion beat forecasts by $0.43 and $580 million respectively), the company’s share price went down dramatically. On the day when Caterpillar published its quarterly results, the company was the largest loser in the Dow Jones Industrial Index, with a share price drop of 6.3 per cent. This sharp decline dragged down the performance of other shares in heavy machinery and construction.

So why did investors aggressively sell shares of Caterpillar and other companies in the sector, despite better-than-expected financial results?

You can read the full article here ConstructConnect Journal of Commerce

This blog does not provide investment advice. Please do your own research and talk to professionals before investing.

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