Does Caterpillar Deserve More Credit for This Bottom-Line Beat?

Caterpillar Inc. (NYSE: CAT) reported its most recent quarterly results before the markets opened on Tuesday. The company said that it had $1.98 in earnings per share (EPS) and $10.6 billion in revenue. That compares with consensus estimates of $1.69 in EPS and $10.92 billion in revenue. The first quarter of last year reportedly had EPS of $3.25 on $13.47 billion in revenue.

The decline was due to lower sales volume driven by lower end-user demand and the impact from changes in dealer inventories. Dealers increased machine and engine inventories about $100 million during the first quarter of 2020, compared with about $1.3 billion during the first quarter of 2019.

Caterpillar ended the first quarter with $7.1 billion of cash and available global credit facilities of $10.5 billion. In April, Caterpillar raised $2.0 billion of incremental cash by issuing new 10- and 30-year bonds and arranged $8.0 billion of additional backup facilities to supplement the company’s liquidity position.

In terms of its segments, Caterpillar reported as follows:

  • Construction Industries sales decreased 27% year over year to $4.31 billion.
  • Resource Industries sales decreased by 24% to $2.08 billion.
  • Energy & Transportation sales decreased by 17% to $4.35 billion.

The company declined to issue guidance for the remainder of 2020, citing the continued impact of the COVID-19 pandemic. Analysts are calling for $5.48 in EPS and $42 billion in revenue for the 2020 full year.

Jim Umpleby, Caterpillar’s board chair and chief executive, commented:

We remain committed to the safety, health and well-being of our employees around the world, and I am proud of our employees and dealers for their dedication to our customers, their communities and each other. Our employees deliver products and services that enable our customers to provide critical infrastructure essential to support society during the COVID-19 pandemic.

Shares of Caterpillar closed Monday at $115.20, in a 52-week range of $87.50 to $150.55. The consensus price target is $122.84. Following the announcement, the stock was relatively flat at $115.20 in early trading indications Tuesday.