Is Caterpillar 'Well Positioned for These Challenging Times'?

Caterpillar Inc. (NYSE: CAT) reported its most recent quarterly results before the markets opened on Friday. The company said that it had $0.84 in earnings per share (EPS) and $10.0 billion in revenue, which topped consensus estimates of $0.64 in EPS and $9.38 billion in revenue. The second quarter of last year reportedly had EPS of $2.83 on $14.43 billion in revenue.

During the most recent quarter, sales and revenues decreased by 31% and profit per share declined 70%. The primary driver of the decline in revenues was lower sales volume, driven by lower end-user demand and the impact from changes in dealer inventories.

Management believes that the company is well positioned for these challenging times because of the successful execution of its strategy. Accordingly, the company will adjust its production as conditions warrant and is prepared to respond quickly to any positive or negative changes in customer demand.

In terms of its segments, Caterpillar reported as follows:

  • Construction Industries sales decreased 37% year over year to $4.05 billion.
  • Resource Industries sales decreased by 35% to $1.83 billion.
  • Energy & Transportation sales decreased by 24% to $4.15 billion.

The company cited uncertainty in regards to the pandemic when it did not issue guidance. Analysts have consensus estimates of $1.23 in EPS and $9.69 billion in revenue for the third quarter.

Caterpillar ended the second quarter with $8.8 billion of enterprise cash and $18.5 billion of available liquidity sources. In July, Cat Financial issued $1.5 billion of new three-year and 18-month medium-term notes to supplement its liquidity position.

Investors did not seem impressed by the positive surprise or management’s assurances. Shares of Caterpillar traded down nearly 3% at $132.87 Friday morning, in a 52-week range of $87.50 to $150.55. The consensus price target is $133.55.