On Wednesday, Caterpillar Inc. (CAT, Financial) announced its third-quarter results. Shares of the Deerfield, Illinois-based manufacturer and international distributor of heavy equipment and engines traded slightly lower by 0.36%, the stock price falling to $133.26 per share in pre-market trading.
Caterpillar posted GAAP earnings of $2.66 per share (missing expectations by 20 cents) on $12.76 billion in revenue, falling $810 million short of projections.
Due mainly to dealers’ inventory movements, GAAP earnings per share was 7.6% lower year over year and revenue fell 5.6% from the prior-year quarter. Dealers’ inventories decreased by approximately $400 million throughout the third quarter of 2019, while they increased by approximately $800 million during the same quarter of 2018.
By segment, the company's construction industries sales declined 7% year over year to $5.29 billion, while its resource industries saw a 12% sales gain to $2.31 billion.
Energy and transportation sales went down 2% to $5.45 billion and machinery, energy and transportation reported a 2% deterioration to $111 million.
In better news, the financial products revenues segment was up 5% to $784 million.
“Our volumes declined as dealers reduced their inventories, and end-user demand, while positive, was lower than our expectations,” Chairman and Chief Executive Officer Jim Umpleby commented. “We remain focused on executing our strategy and continuing to achieve our Investor Day targets for margin improvement and free cash flow.”
The balance sheet had $7.91 billion in cash and short-term securities, $12.2 billion in total inventories and $33.64 billion in total debt as of Sept. 30. Property, plant and equipment were valued at $12.84 billion and total equity was worth almost $15 billion.
During the quarter, the company also bought back approximately $1.2 billion of shares of its own common stock and returned about $0.6 billion cash to its shareholders in the form of paid dividends.
Looking ahead to full 2020, the company reduced its profit outlook to a range of $10.59 to $11.09, versus the previous outlook which was near the lower limit of the previous range of $11.75 to $12.75. Reduced profit outlook implies lower 2020 sales. Sales projections stand at $54.86 billion, or 1.3% down from full-year 2019, which includes expectations for fourth-quarter revenues of $14.5 billion.
Caterpillar Inc.'s stock price has climbed 5% so far this year to place above the 120-, 70- and 30-day simple moving average lines. The share price was $133.69 at close on Tuesday for a market capitalization of $75.2 billion.
The 52-week range is $111.75 to $144.77.
Currently, Caterpillar pays a quarterly dividend of $1.03 cents per common share. The next payment is scheduled to be sent out on Nov. 20. The distribution produces a forward dividend yield of 3.08% versus the S&P 500’s yield of 1.91% as of Oct. 22.
Sell-side analysts issued an overweight recommendation rating for shares of Caterpillar Inc. with an average target price of $139.78.
Disclosure: I have no positions in any securities mentioned.
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