Caterpillar Earnings: End-Market Demand Waivers as Pricing Begins to Moderate

Third-quarter results for wide-moat-rated Caterpillar were lower than our expectations, driven primarily by lower sales volume in the construction and resource segments. Consolidated revenue decreased 4% year over year as only the energy and transportation segment experienced growth. That said, the consolidated operating margin was resilient in the quarter at 20%, largely due to favorable pricing. We have raised our fair value estimate to $267 per share from $249 due to an increase in our midcycle margin forecast.