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Global industrial equipment manufacturer Caterpillar reported worse than expected second quarter 2019 EPS before the market open Wednesday and again warned that China demand was falling and the trade war impacting. $CAT fell 5% on the release.

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

$2.83 Missed $3.12 EPS Forecast AND $14.432 Missed $14.435 billion forecast in revenue 

Earnings

Caterpillar Inc. (NYSE: CAT) reported worse than expected earnings and revenue on Wednesday. Caterpillar earned $2.83 per share in the second quarter, less than the consensus estimate of $3.12 per share, according to Refinitiv. Revenue also missed with $14.432 billion reported compared to the $14.435 billion Wall Street analysts expected, according to Refinitiv.

$CAT also lowered full-year earnings guidance to be at the lower end of previous range of $12.06 to $13.06, short of the estimate of $12.24 per share.

Market Reaction > Caterpillar Inc. NYSE: CAT

Pre-market 131.74 USD −6.32 (4.58%)

Highlights

  • Increase in manufacturing costs, which came from “higher material costs, including tariffs, variable labor and burden and warranty expense,”
  • Sales in Asia-Pacific declined in the second quarter mainly because of the lower demand in China, the company said.
  • Construction division was the major contributor to earnings for Caterpillar saying improved demand from the North American region,
  • Latin America reported flat sales due to reduced construction activity.
  • European region sales drop was mainly attributed to currency headwinds.
  • Lower demand from China continues to drag the Asia Pacific performance due to intense competition and pricing pressure.

Caterpillar Q2 2019 Earnings

Company management failed to address the earnings and revenue miss in the company’s press release, with executives trumpeting its cost structure and strategic investments.

“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,” said Caterpillar Chairman and CEO Jim Umpleby in a statement.

Outlook

2019 Guidance Caterpillar revisions to the earnings outlook were to the lower end of the range provided last quarter.

On a GAAP basis, EPS is expected at $12.06-13.06. It also added that EPS can be expected at the lower end of the outlook provided. On an adjusted basis, earnings is projected in the range of $11.75-12.75 per share. The company also added that the oil and gas industry will see improved demand in the latter half of the year which would be accretive to earnings.

For the full-year period, the street is anticipating revenue of $56.54 billion, up 3.3% over the prior year, and adjusted EPS to come in at $12.24 compared to $11.22 reported last year.

 Source: CAT, AlphaStreet

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