Caterpillar Reports 1st-Quarter Results
Caterpillar Inc. (NYSE:CAT) released its first-quarter results before the opening bell on April 28.
The heavy equipment manufacturer posted earnings and revenue that fell short of analysts' expectations owing to sluggish demand across all business segments and geographies.
By the numbers
The Deerfield, Illinois-based company recorded adjusted earnings of $1.60 per share, down from $2.94 per share reported in the prior-year quarter. Revenue of $10.6 billion tumbled 21% on a year-over-year basis. Analysts had predicted earnings of $1.69 per share on $11.13 billion in revenue.
Selling, general and administrative costs decreased 15% to $1.1 billion, while research and development expenses fell 18% to $356 million. Operating profit amounted to $1.4 billion, down 36% from the same period last year thanks to lower sales volume and adverse currency impact associated with the Australian dollar.
Segment performance
Sales in the Machinery and Energy and Transportation (ME&T) division stood at $9.9 billion, down 22%. This was attributable to a sales decline in Energy & Transportation ($4.3 billion). The operating profit dropped a mammoth 38% to $1.34 billion.
Resource Industries' sales dipped 24% to $2.1 billion on low demand for both mining and heavy construction equipment. The operating profit amounted to $304 million, which reflected a decrease of 47% year over year.
Construction Industries' sales were $4.3 billion, down 27% on account of weak sales volume. Profit came in at $640 million, which reflected a decline of 41%.
Geographically, sales were down 27% in Asia Pacific, 24% in North America, 21% in Latin America and 7% in the Europe, Africa and the Middle East (EAME) segments as the Covid-19 pandemic hampered demand.
Key insights
The industrial giant said roughly three-fourths of its primary production facilities are functioning in the middle of the pandemic, while operations in some other facilities, which were temporarily shut down due to weak demand as well as in an effort to stop the spread of coronavirus, have resumed.
In view of trimming costs, the company is holding back on increasing annual salaries as well as bonuses for many employees and senior executives.
Guidance
The company did not provide 2020 guidance, citing the global uncertainty caused by the pandemic. Caterpillar's CEO Jim Umpleby said:
"The ultimate impact of the pandemic on our 2020 results remains uncertain and will be based on the duration of the virus and the magnitude of the economic impact on global demand for our products."
Disclosure: I do not hold any positions in the stocks mentioned.
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This article first appeared on GuruFocus.
