Data center boom drives Q2 earnings growth for Caterpillar
Key Takeaways:
- Caterpillar shares jumped more than 11% premarket Aug. 4 after second-quarter earnings and revenue beat Wall Street estimates and sales reached $20.5 billion.
- Earnings excluding one-time items rose to $8.17 per share and backlog hit a record $72 billion, driven largely by demand tied to data center expansion.
- The results eased concerns about AI-related capital spending after recent declines in power-equipment stocks and scrutiny from analysts and investor Michael Burry.
Caterpillar Inc. jumped after the company’s second-quarter earnings blew past Wall Street’s second-quarter expectations, easing concerns over the growth of power-generation equipment sales to data centers.
The shares surged more than 11% in pre-market trading on Aug. 4 after the U.S. machinery maker reported stronger sales across its businesses and a record backlog for equipment orders. Sales rose to $20.5 billion in the period, exceeding the $19 billion average of estimates compiled by Bloomberg.
“Strong order rates and a growing backlog reflect broadening momentum across all three of our primary segments,” Chief Executive Joe Creed said in a statement.
Caterpillar’s power and energy unit manufactures generators, engines and gas turbines for industrial facilities and large-scale computing centers. The segment has grown to become the company’s largest by sales, overtaking its better known business that manufactures diggers and other construction machinery, and catching the eye of investors who have made Caterpillar part of the broader AI.
The company’s second-quarter earnings excluding one-time items were $8.17 per share, compared with $4.72 a year earlier. That compared with the $6.17 average of analysts’ estimate compiled by Bloomberg.
The company also posted a record backlog of $72 billion, up 92% from a year ago.
“Those backlogs are pointing to the same drivers — data center build-outs. Chips, servers, now industrial equipment,” said Mark Malek, Chief Investment Officer at Siebert Financial.
The earnings and revenue beat comes after a recent selloff in AI-adjacent stocks amid concerns about the sustainability of capital spending by Big Tech. Caterpillar and other manufactures of power equipment for data center, such as Vertiv Holdings Co. and GE Vernova Inc., saw their stock prices decline in recent weeks.
Baird downgraded Caterpillar’s stock last week to a hold-equivalent rating, citing a growing push by local and state governments to restrict construction of data centers. And investor Michael Burry, well known for his bets against the U.S. housing market prior to the 2008 crisis, has said he is shorting the stock.
The construction industries business, which makes the firm’s signature yellow construction machinery, also saw strong growth for the quarter, with sales increasing 35% as dealers stocked up on equipment.
