Caterpillar Inc. (CAT), one of the DOW’s 30 stocks, is a heavy machinery manufacturer that produces the well-known gigantic yellow machines. These machines are operating in almost every country in the world. Nearly 63% of Caterpillar’s revenues were acquired in locations other than North America in 2012. Not only did the company recently announce an impressive stock repurchase program, but it took a great leap on Monday after announcing outperforming earnings results.
This drew a lot of eyes of long-term investors, with an eye on global economic growth and construction activity. The demand for Caterpillar products continues to grow.
Caterpillar announced fourth quarter earnings for fiscal year 2013 on Monday that surprised many. The company’s revenue actually declined roughly 10% for the quarter, mostly because of the intense slowing of the company’s Mining Machinery segment. This put profit at $14.4 billion as opposed to over $16 billion for 2012. The diluted earnings per share, however, did indeed increase year over year to $1.54 (48%) compared to 2012’s numbers.
- Warning! GuruFocus has detected 8 Warning Signs with CAT. Click here to check it out.
- CAT 15-Year Financial Data
- The intrinsic value of CAT
- Peter Lynch Chart of CAT
The most exciting aspect about the earnings report, was that it beat analyst estimates all around. Caterpillar’s revenue of $14.4 billion was far above average estimates of $13.61 billion. Earnings per share were also beat out by $0.26, totalling $1.54, which is far better than the estimated $1.28. This caused the company’s shares to jump over 6%, pulling their peers right along with them.
Caterpillar’s management also announced the company’s expanded share repurchase program. The current $7.5 billion stock buyback is anticipated to end soon after the company presumably repurchases the remaining $1.7 billion that the program has left to offer in the first quarter of 2014.
The board of directors approved an additional $10 billion share repurchase program allowing stock to be repurchased out until 2018. CEO Doug Oberhelman stated, “The completion of our previous program and the decision to announce a new $10 billion program are a result of our record cash flow, the strength of our balance sheet and our confidence in the long term future of Caterpillar.”
The company faced a bumpy past year, but the new year is looking up in most regards. Important trends are starting to point in the right direction, and aggressive buybacks are becoming an important factor for Caterpillar, but is now the right time? What are your thoughts?
Disclosure: No current position held at the time of writing.
Disclaimer: The opinions and ideas in this article are for informational and educational purposes only. They are not a recommendation to buy or sell any stock at any given time. As always, it is imperative for each individual investor to do their own due diligence and perform their own research on any and all stocks before making an investment decision.