Skip to Content
Market Update

Cat Enjoys Strong Revenue Growth, but Flat Profitability

The Bucyrus and EMD acquisitions weigh on operating profitability in 3Q, but we think both acquisitions will add materially to the bottom line over the coming quarters.


 Caterpillar (CAT) reported solid third-quarter results Monday, and we plan to maintain our $101 fair value estimate. Machinery and engine revenue climbed nearly 44% year over year, largely because of higher unit volume (including continued dealer inventory restocking) and 11 percentage points of growth from the recent acquisition of mining equipment manufacturer Bucyrus.

However, operating profitability was essentially flat year over year and sequentially, stemming from the dilutive effects of the Bucyrus and EMD acquisitions; the firm posted just 11.7% in all-in incremental margins, a far cry from the high 20s enjoyed in this year's first quarter. But excluding the losses associated with these purchases, Cat's incremental margins climbed to 22% from a weak 18% in the second quarter, and we think both acquisitions will add materially to the bottom line over the coming quarters as they are fully integrated.

Adam Fleck does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.