Caterpillar Inc. (NYSE: CAT) reported third-quarter 2018 results before markets opened Tuesday. The heavy equipment firm posted adjusted diluted earnings per share (EPS) of $2.86 on revenues of $13.5 billion. In the same period a year ago, the company reported adjusted EPS of $1.95 on revenues of $11.4 billion. Third-quarter results also compare to consensus estimates for EPS of $2.85 and $13.29 billion in revenues.

Cat lifted its outlook for GAAP EPS from a prior range of $10.50 to $11.50 to a new one of $10.65 to $11.65 but left its adjusted EPS guidance unchanged at $11.00 to $12.00. The adjusted estimate excludes approximately $400 million in restructuring and a $95 million tax benefit.

At the end of the third quarter, Cat’s order backlog totaled about $17.3 billion. This represents a sequential decrease of about $400 million. Year over year, the backlog is up by $1.9 billion.

The company also noted that it expects pricing strength, operational excellence and cost discipline in the fourth quarter “to more than offset higher material and freight costs, including tariffs.”

Cat’s third-quarter numbers were fine, but the outlook is suspect. Order backlog is down slightly, prices are going up and the supply chain is not operating smoothly. Separately none is a very big deal, but taken as a group with today’s mood, even small things get magnified.

Operating profit rose from $1.51 billion a year ago to $2.14 billion, due primarily to higher sales volume and better price realizations. Higher volume accounted for $793 million of the increase and higher prices contributed an additional $155 million. Manufacturing costs rose year over year by $205 million, which Cat attributed to increased material costs, primarily in steel prices and tariffs and higher freight costs due to supply chain inefficiencies.

CEO Jim Umpleby said:

This was the best third-quarter profit per share in our company’s history. Our global team continues to do excellent work focusing on our customers’ success and executing our strategy for profitable growth.

Analysts have a current estimate for fourth-quarter revenues of $14.37 billion and EPS at $2.99. For the full year, the consensus estimates called for EPS of $11.66 and sales of $54.43 billion.

Cat is one reason the Dow traded down nearly 400 points in Tuesday’s premarket. Shares of the industrial firm traded down nearly 7% at $119.95, after closing Monday at $128.71. The stock’s 52-week trading range is $128.66 to $173.24, and that low was posted yesterday. The 12-month price target as of last night’s close was $167.86.

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