Caterpillar Sinks About 8% Despite Q3 Profit Beat as In-Line Sales and a Steady Outlook Disappoint

CAT reported third-quarter adjusted profit per share of $7.20 on Thursday, up from $4.95 a year earlier and ahead of the roughly $7.03 analysts expected. Sales and revenues rose 17% to $20.68 billion, according to the company's release, which left the top line essentially in line: one widely used consensus of $20.69 billion put revenue $8 million short, which is why some headlines called it a miss and others a beat. The stock fell more than 10% before the open and was down about 8% at $655.57 in early afternoon trading, from a $713.38 prior close.

The quarter itself was strong. Adjusted operating margin widened to 20.6% from 17.5%, Power & Energy sales rose 18% to $8.78 billion, and Power Generation sales climbed 30% to $3.42 billion, which the company tied primarily to data center applications. Construction Industries grew 18% and Resource Industries 15%. Profit also included $128 million of tariff recoveries, against $460 million of unfavorable manufacturing costs that include tariffs.

The selloff was about expectations rather than the print. Caterpillar had gained more than 23% this year before the report and traded near 25 times forward earnings against a five-year average near 19. Management guided to only moderate fourth-quarter sales growth and gave no dollar figure for its record backlog in the release, while inventories rose to $22.2 billion from $18.1 billion. Commentators tied the move to a broader cooling in the AI power trade, after megacap tech results revived questions about AI spending.

Peers mostly held up: DE was slightly higher and PCAR slipped less than 1% in morning trading, while VRT and GEV fell 2% and 3% before the bell. What to watch next is whether the data center power business keeps growing fast enough to justify the multiple once tariff recoveries fade, and whether the fourth-quarter outlook firms up on the call details.