Equipment producer Caterpillar released its second quarter financial results. Robust performance in many of its end markets as well as some extensive cost reduction programs boosted its quarterly results.
By the numbers
Caterpillar’s adjusted earnings per share came in at $2.97 in the second quarter. As a matter of fact, the company’s revenue during for same period stood at $14 billion. The company attributed its revenue growth to strong demand across all segments, especially construction. Caterpillar’s CEO Jim Umpleby commented:
"Caterpillar delivered record second-quarter profit per share," He added:"Our team is doing a great job executing our strategy for profitable growth, focusing on operational excellence, expanded offerings and services."
Selling, general and administrative expenses amounted to $1.4 billion that reflected a 10% year-over-year increase. Further, the company’s research and development soared 1% year on year to $462 million.
The company bought back shares worth $750 million during the quarter. In fact, the company expects buyback of shares to continue at the same pace in the second half of the year as well.
At the end of the second quarter, the company stood at a healthy backlog of $17.7 million thanks to huge demand across all its segments.
Segment details
Machinery and Energy & Transportation (ME&T) segment saw sales growth of 25% on a year-over-year basis to $13.3 billion. The company attributed this growth to a favorable currency impact and favorable price realization. The sector also recorded an operating profit of $2.1 billion.
Sales in the construction industries climbed 24% from the year-ago quarter due to higher sales of construction equipments as well as favorable foreign exchange rate. Profit in the construction industries inched up 28% to $1.2 billion on the back of higher volumes of sales, which remained unaffected by unfavorable price realization, higher material and freight costs as well as a rise in SG&A and R&D expenses. The Resource industries posted sales gain of 38%. The company’s operating profit amounted to $411 million that grew a mammoth 315% from the prior-year quarter.
Looking ahead
For fiscal 2018, the company anticipates earnings per share to come in at around $11 to $12, up from its previous guidance of $10.25 to $11.25 per share. However, the company expects its material expenditure to rise by roughly $100 million to $200 million on account of the imposition of tariffs. The company’s freight cost is also expected to be on the rise as a result of supply chain problems in the second half of the year. The equipment maker says that it would try to compensate for the rising costs by raising prices. Further the company would also adopt structural cost discipline.
Disclosure: I do not hold any position in the stock mentioned in this article.
