A Look At Caterpillar's Odd Volatility Thursday

Shares of Caterpillar Inc. (NYSE: CAT) were trading higher by more than 3 percent ahead of Thursday's market open and even traded above its all-time high of $173.24. But the stock opened at $173.10 and then quickly traded as low as $162.46 before rebounding to the $170 level. Shares were trading down nearly 1 percent at $168.54 Thursday afternoon. 

What You Need To Know

Caterpillar reported fourth quarter-results before the open Thursday that exceeded Wall Street's expectations. The company said it earned $2.16 per share in the quarter on revenue of $12.9 billion versus expectations of $1.79 per share on revenue of $11.98 billion.

Caterpillar's strong performance in the quarter was attributed to surging demand for the company's machinery in China, an improving U.S. economy and other factors. 

Why It's Important

Surprisingly, Caterpillar's stock moved sharply lower after the market open, a confusing move given that the company's earnings report exceeded the Street's most bullish forecasts, Bloomberg's Taylor Riggs said. During the quarter, the company's global retail machine sales rose by 34 percent, making it the strongest quarter seen since 2011.

A likely explanation for the sell-off could be profit-taking, as Caterpillar is the second best-performing Dow component over the past year, she said. The move could not be attributed to any commentary made during the post-earnings conference call, as the event only started at 11 a.m. ET. 

What's Next?

Some of the early commentary from Caterpillar's conference call includes:

• Expectations for tax reform to create a "level playing field" against the company's' competitors and give management access to cash for capital allocation commitments.
• Expectations for all business segments to improve in 2018 and demand to be "up slightly."
• Expectations for a resolution of a U.S. tax probe of the Swiss unit to come in an "expeditious manner."

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