Caterpillar Inc. (NYSE: CAT) reported fourth-quarter and full fiscal 2019 results before markets opened Friday. For the quarter, the heavy equipment firm posted adjusted diluted earnings per share (EPS) of $2.63 on revenues of $13.1 billion. In the same period a year ago, the company reported adjusted EPS of $2.55 on revenues of $14.3 billion. Fourth-quarter results also compare to consensus estimates for EPS of $2.37 and $13.41 billion in revenues.
For the full year, the industrial giant reported EPS of $11.06 and revenues of $53.8 billion. That compares with 2017 EPS of $11.22 and revenues of $54.7 billion. Analysts had forecast EPS of $10.82 and revenues of $54.09 billion.
In its outlook for 2020, Caterpillar said it expects profit per share in the range of $8.50 to $10.00. CEO Jim Umpleby commented, “We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inventories.” Analysts had forecast full-year EPS of $10.82 on sales of $54.09 billion.
Umpleby added:
In the fourth quarter, strong cost control more than offset lower-than-expected end-user demand. Our margin performance reflected our diligent focus on maintaining a flexible and competitive cost structure. While sales declined modestly in 2019, we delivered an operating margin and free cash flow consistent with our long-term targets and continued to invest in services and expanded offerings.
Sales in the company’s construction segment fell by 12% to $5.02 billion, and resource industry sales dropped by 14% to $2.4 billion. Lower volume was driven by changes in dealer inventories and lower end-user demand. Sales in the energy and transportation segment were down 5% to $5.95 billion, although sales in the Asia/Pacific region rose by 26% to $947 million.
Profits fell by 22% in the construction industries segment to $659 million and by 35% in the resource industries segment to $261 million. The energy and transportation segment saw profit growth of 8% to $1.17 billion. Overall operating profit was down 2% to $1.85 billion.
Caterpillar’s earnings forecast for the year tops out well short of what analysts had expected. What saved 2019 was higher prices and better cost control. This year will need to see further cost control, absent higher pricing. This year is all about margins and execution.
Caterpillar stock traded down about 1.2% at $133.70 a share, after closing Thursday at $135.37. The stock’s 52-week range is $111.75 to $150.55. The 12-month price target as of last night’s close was $149.91.
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