Caterpillar Inc. (CAT, Financial) released its first-quarter results before the opening bell on April 28.
The heavy equipment manufacturer posted earnings and revenue that exceeded Wall Street’s estimates as cost-cutting initiatives helped negate poor end-user demand.
By the numbers
The Deerfield, Illinois-based company recorded earnings per share of 84 cents, down from $2.83 per share reported in the prior-year quarter. Analysts had predicted earnings between 68 and 72 cents per share. Revenue of $10.6 billion tumbled 31% on a year-over-year basis but surpassed expectations of $9.4 billion.
Operating profit amounted to $784 million, down 65% from the same period last year thanks to lower sales volume and unfavourable price realization. This was partially compensated by lower selling, general and administrative (SG&A) expenses and research and development expenses.
The company exited the quarter with $8.8 billion of enterprise cash. In addition, the company had $18.5 billion of available debt sources.
Segment performance
Sales in the Energy and Transportation division stood at $4.15 billion, down 24% from the prior year. Within the segment, the oil and gas and power generation segments witnessed slumps in sales. The operating profit dropped 30% in the second quarter to $624 million.
Resource Industries' sales dipped 35% to $1.83 billion on low demand for both mining and heavy construction equipment. The operating profit amounted to $152 million, which reflected a decrease of 68% year-over-year.
Construction Industries' sales were $4.05 billion, down 37% on account of weak sales volume. Operating profit came in at $518 million, which reflected a decline of 58%.
Geographically, consolidated sales were down 17% in Asia Pacific, 40% in North America, 41% in Latin America and 17% in the Europe, Africa and the Middle East (EAME) segments.
Key insights
The industrial giant said that the primary production facilities across all its three main segments are now functioning. However, some facilities are running at reduced capacities.
In view of trimming costs, the company has also held back on increasing annual salaries as well as bonuses for many employees and senior executives. Chairman and CEO Jim Umpleby commented:
"We are well positioned for these challenging times because of the successful execution of our strategy. We are focused on employee safety and maintaining a competitive and flexible cost structure while continuing to invest in services and expanded offerings to better serve our customers. We will adjust production as conditions warrant and are prepared to respond quickly to any positive or negative changes in customer demand."
The company did announce that it will still be paying dividends.
Guidance
Caterpillar did not provide any financial forecast for 2020.
Disclosure: I do not hold any positions in the stocks mentioned.
Read more here:
- Yum Brands Beats 2nd-Quarter Earnings and Revenue Expectations, Posts Weak Comps
- Key Highlights of Boeing’s 2nd-Quarter Results
- What Investors Should Know About General Electric's 2nd-Quarter Results
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
