Farm and construction machinery and equipment manufacturer Caterpillar Inc. (CAT, Financial) reported disappointing second-quarter results before the opening bell on Wednesday, sending shares 6.7% lower in premarket trading.
The Deerfield, Illinois-based company posted earnings of $2.83 per share, falling short of Refinitiv’s estimates of $3.12. Revenue grew 3% from the prior-year quarter to $14.43 billion, just shy of expectations of $14.44 billion.
Affected by the ongoing trade conflict between the U.S. and China, Caterpillar said its results were hurt by higher manufacturing and material costs as well as tariffs, variable labor and burden and warranty expenses.
The company also recorded a 22% decrease in sales in the Asia-Pacific region due to lower demand in China. In contrast, sales in North America increased 28% to $3.5 billion.
By segment, sales in the construction industries division grew 5% from the year-ago quarter to $6.46 billion. The resource industries business also recorded 11% growth to $2.8 billion. Sales in the energy and transportation segment declined 4% to $5.48 billion. The financial products business recorded a 5% increase to $873 million.
In a statement, Chairman and CEO Jim Umpleby said Caterpillar’s performance for the quarter “reflected [its] strong competitive position globally.”
“Our strong operating cash flow in the quarter allowed us to repurchase shares and pay dividends of about $1.9 billion,” he added. “This is in line with our intention to return substantially all free cash flow to shareholders.”
As it expects to be further impacted by the U.S.-China trade war, Caterpillar revised its full-year earnings guidance to be at the lower end of its previously stated range of $12.06 to $13.06.
“We expect our profit per share in 2019 to be another record,” Umpleby said. “We have the right strategy in place to deliver long-term profitable growth through our continued focus on strategic investments, including growing services and expanding offerings. We will also continue to focus on driving operational excellence, including a flexible and competitive cost structure.”
With a $78.98 billion market cap, Caterpillar shares were trading around $131.83 on Wednesday morning. After tumbling approximately 19% in 2018, GuruFocus estimates the stock has gained 4% year to date.
Gurus who are invested in the stock as of the end of the first quarter include Bill Gates (Trades, Portfolio)’ foundation trust, PRIMECAP Management (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Bill Nygren (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio), among others.
According to the GuruFocus Industry Overview page, Caterpillar is the biggest player in the farm and construction machinery sector, followed by Deere & Co. (DE, Financial), CNH Industrial NV (CNHI, Financial), AGCO Corp. (AGCO, Financial), Terex Corp. (TEX, Financial) and several other companies.
Disclosure: No positions.
Read more here:
- Schlumberger Shares Slide as Earnings Fail to Impress
- Dodson's Parnassus Endeavor Fund Picks Up 2 Stocks in 2nd Quarter
- The Top 5 Buys of the T Rowe Price Equity Income Fund
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
