Caterpillar Delivers Earnings Beat But Shares Still Fall. Here’s Why
2022.04.28 17:16
Caterpillar (CAT) Delivers Earnings Beat But Shares Still Fall. Here’s Why
Shares of Caterpillar (NYSE:CAT) are down 2.7% in premarket trading after the company reported Q1 results.
This is despite the company reporting Q1 earnings and revenue that beat expectations. CAT reported adjusted EPS of $2.88 in the first quarter, compared to $2.87 in the year-ago quarter and consensus estimates of $2.61. Revenue came in at $13.59 billion, up 14% YoY and above the analyst consensus of $13.43 billion.
The Machinery, Energy & Transportation segment generated revenue of $12.89 billion in the period, up 15% YoY and above the expected $12.79 billion.
Looking ahead, the company expects Q2 2022 sales to outpace the Q1 results, thanks to strong end-user demand and pricing. Caterpillar expects the Q2 2022 adjusted operating profit margin to be similar to the same quarter last year and anticipates price increases to offset higher manufacturing costs this year.
Caterpillar stock was hit after results showed weakness in demand from China.
“Lower sales in China primarily driven by lower end-user demand were partially offset by increased sales across the majority of the region,” CAT said in a statement.
Moreover, Caterpillar said dealers boosted inventories by $1.3 billion during the first quarter, up from a $700 million increase in the same period last year.
“Unfavorable manufacturing costs primarily reflected higher material and freight costs,” the company added.
Goldman Sachs analyst Jerry Revich commented:
“CAT delivered strong 1Q results including margins that were 30 bps ahead of our estimates and orders that were up 17% yoy (1.3 book to bill). However, dealer inventories built by $1.3 bn in the quarter – ahead of our $450 mn estimate and +$1.2 bn in 2018 (roughly in-line when adjusted for inflation) – an indicator that supply may be catching up with demand. Dealer inventory build was a $850 mn revenue tailwind in the quarter compared to our estimate vs. a $500 mn revenue beat,” Revich said.
By Senad Karaahmetovic
