Yahoo Finance Caterpillar Shares Plunge After Warning of Slower Second-Quarter Sales
(Bloomberg) -- Caterpillar Inc. reported first-quarter results that showed machinery sales slipping from a year earlier and warned that the trend is expected to continue in its second quarter.
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Shares of Caterpillar fell as much as 9.1% in New York, the biggest intraday decline in four years, after the heavy equipment maker said in its earnings report that it expects second-quarter sales to be lower than the year-earlier period. While the company posted adjusted profit that beat analysts’ estimates, sales in its key construction and resource industries divisions fell, and overall revenues continued to show weakness outside North America.
Caterpillar is widely viewed as an economic bellwether, given how demand for its iconic yellow machines that dot mines and construction sites can shed light on the health of those industries around the world. Caterpillar reported adjusted earnings of $5.60 a share for the first quarter, beating the $5.13-a-share average estimate of analysts surveyed by Bloomberg.
“Underlying profitability was better than anticipated, though a larger-than-expected dealer inventory build as retail sales weaken is likely to stir angst around production schedules,” Bloomberg Intelligence analyst Christopher Ciolino said in a note.
Caterpillar, one of the world’s biggest producers of heavy machinery, has benefited from robust earnings during the past three years, beating expectations in almost every quarter since 2020, often by posting better-than-anticipated revenues.
“We expect a continuation of healthy demand across most of our end markets for our products and services,” Chief Executive Officer Jim Umpleby said during Thursday’s earnings call.
He reiterated the firm’s February guidance that sales and revenues in 2024 will be broadly similar to last year’s record level. Caterpillar doesn’t anticipate a significant change in machine dealer inventory this year, which “is expected to be a headwind to sales in 2024,” Umpleby said.
Moderating demand in manufacturing in regions including Asia and Europe along with slowing non-residential construction has been a challenge for machinery makers such as Caterpillar, though rising industrial activity in the US and China are showing signs of promise ahead.
Sales and revenues in the latest first quarter were $15.8 billion, slightly less than the first quarter of 2023, with favorable price realization mostly offsetting lower sales volume, the company said.
Strong earnings from North America — Caterpillar’s most important market — have helped the company offset weakness from other regions, including Europe, Latin America and Asia in previous quarters. That trend continued in the first quarter. Caterpillar’s energy and transportation business also posted a 7% gain in sales and revenues, the only segment to see an increase.
(Adds CEO comments from call and opening shares.)
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