Caterpillar Earnings Miss as Dealers Decrease Inventories, Lower China Demand

Global industrial equipment manufacturer Caterpillar reported worse than expected third quarter 2019 EPS before the market open Wednesday and again warned that China demand was falling. $CAT fell 2.5% but reversed to close up 1.2% on the day. Caterpillar also lowered full-year earnings guidance.

Global industrial equipment manufacturer Caterpillar reported worse than expected third quarter 2019 EPS before the market open Wednesday and again warned that China demand was falling. $CAT fell 2.5% but reversed to close up 1.2% on the day. Caterpillar also lowered full-year earnings guidance.

Caterpillar Convoy

Caterpillar Inc. (NYSE: $CAT) Reported Earnings Before Open Wednesday

$2.56 Missed $2. 88 EPS Forecast AND $12.758 Missed $13.572 billion forecast in revenue 

Earnings

Caterpillar Inc. (NYSE: CAT) reported worse than expected earnings and revenue on Wednesday. Caterpillar earned $2.66 per share, compared with analysts’ estimates of $2.88 per share, according to Refinitiv. Revenue also missed with $12.758 billion reported versus the $13.572 billion Wall Street analysts expected.

The company blamed the poor results on a reduction in inventories from dealers. Executives said in a press release this weakness could persist due to “global economic uncertainty” resulting from “trade tensions and other factors.”

Market Reaction > Caterpillar Inc. NYSE: CAT

Market Close $135.34  +1.65 (+1.23%)

Highlights

  • Dealers decreased inventories by about $400 million in the third quarter. In the same period last year, they increased inventories by $800 million.

“Our volumes declined as dealers reduced their inventories, and end-user demand, while positive, was lower than our expectations,” said Caterpillar Chairman and CEO Jim Umpleby.

  • Caterpillar’s sales in Asia-Pacific declined 13% in the third quarter mainly because of the lower demand in China, the company said.

Caterpillar Q3 2019 Earnings

Outlook

Caterpillar lowered its full-year earnings per share forecast to a range of $10.59 and $11.09 from $12.06 and $13.06 a share. Analysts expected an outlook of $11.70 per share. The company said it now expects fourth-quarter demand to be flat, dragging down by a $900 million reduction in inventories.

CEO Jim Umpleby said in a statement, “In the fourth quarter, we now expect end-user demand to be flat and dealers to make further inventory reductions due to global economic uncertainty. Caterpillar’s improved lead times, along with these dealer inventory reductions, will enable us to respond quickly to positive or negative developments in the global economy in 2020.”

 

 Source: CAT, AlphaStreet

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