Caterpillar stocks are recovering wonderfully after taking a hit following Q3 results

CAT stock falls more than 5% before fully recovering.
Caterpillar earned $5.17 per share on revenue of $16.1 billion in the third quarter.
The decline in hardware sales to end users resulted in a year-over-year decline in sales.
The outlook for the fourth quarter doesn’t look any less rosy now as management sees weakness in construction.

Caterpillar (CAT) stock photography turns this face upside down, as they say. The construction and mining equipment maker rose from an early Wednesday morning sell-off of 5.2% to a slight gain just before the noon break in New York.

The market largely performed strongly during the midweek session after Alphabet’s ( GOOGL ) gains overdue Tuesday sparked a surge in buy orders. The Dow Jones Industrial Average (DJIA) rose 0.5%, almost double the S&P 500 and NASDAQ at the time of writing.

US GDP for the third quarter was lower than the expected 3.0% on Wednesday and amounted to 2.8%. However, the ADP Employment Change report for October was printed well above the consensus.

Caterpillar Stock News

In the third quarter, Caterpillar underperformed the Wall Street consensus. The Irvine, Texas-based company posted adjusted earnings for the quarter of $5.17, 3.5% below Wall Street’s expectation of $5.35.

Revenue of $16.1 billion was $140 million below the consensus estimate and fell more than 4% from a year earlier.

Management also surprised shareholders by admitting weakness in its fourth-quarter forecasts. Full-year sales prospects are now likely to be lower than management’s earlier forecasts, with management attributing this to weakness in the construction industry.

Caterpillar Stock Chart

The first thing to notice is that CAT stock hit the $362 support level and immediately bounced off of it. This $362-$369 support region has been significant since it acted as resistance in March, April, May, and June this year. As the CAT dropped below and then climbed back above the 50-day straightforward moving average (SMA) during Wednesday’s session, it appears that the market has already priced in the fourth quarter concerns.

With such impoverished earnings reports, CAT’s share price seems safe and sound. The recovery has been so impressive that CAT is unlikely to lose the $362 level in the coming sessions. While the Relative Strength Index (RSI) has been degenerating recently, expect CAT to start consolidating here.

Daily CAT stock chart