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Caterpillar (CAT) Q1 Earnings Top Estimates on Higher Pricing
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Caterpillar Inc. (CAT - Free Report) reported first-quarter 2024 adjusted earnings per share of a record $5.60, which beat the Zacks Consensus Estimate of $5.12 by a margin of 9%. The bottom-line figure marked a 14% year-over-year improvement.
Favorable price realization and manufacturing costs, largely reflecting lower freight and improved performance in the Energy & Transportation segment, mainly led to the improvement in CAT’s earnings for the quarter. Both the Construction Industries and Resource Industries segments experienced declines in sales of equipment to end users.
Including one-time items, Caterpillar’s earnings per share were $5.75, up 54% from $3.74 in the year-ago quarter.
Revenues Flat as Low Volumes Offset Prices
The company reported first-quarter revenues of around $15.8 billion, which missed the Zacks Consensus Estimate of $16.1 billion. The top line was flat compared with the year-ago quarter as favorable price realization was offset by lower volumes. Caterpillar witnessed lower sales of equipment to end users.
Improved results in the Energy & Transportation segment were offset by weaker performances in the Construction Industries and Resource Industries segments. North America and Latin America witnessed 8% and 1% year-over-year improvement in sales in the first quarter. This was offset by a 17% sales decline in EAME and a 5% drop in sales in Asia Pacific.
Caterpillar Inc. Price, Consensus and EPS Surprise
In the quarter under review, the cost of sales decreased 4% year over year to $9.7 billion. Gross profit improved 6.6% year over year to $6.1 billion on favorable manufacturing costs mainly due to lower freight costs. The gross margin was 38.8% in the quarter under review, up from 36.3% in the year-ago quarter.
Selling, general and administrative (SG&A) expenses increased 8% year over year to around $1.6 billion. Research and development (R&D) expenses were up 10% to $520 million. This was mainly due to CAT’s ongoing investments aligned with strategic initiatives.
CAT reported an operating profit of $3.5 billion in the first quarter of 2024 compared with $2.7 billion in last year’s quarter. Favorable price realization and the absence of the impact of the divestiture of the company's Longwall business in 2023 helped offset the impact of lower volumes, leading to a 29% year-over-year rise in profits. The operating margin was 22.3% in the reported quarter, up from 17.2% in the year-ago quarter.
Adjusted operating profit was around $3.5 billion in the quarter, up 5% from $3.3 billion in the year-ago quarter as favorable price realization and manufacturing costs offset elevated SG&A and R&D expenses. The adjusted operating margin was 22.2% in the quarter under review compared with 21.1% in the year-ago quarter.
Segmental Performances
Machinery and Energy & Transportation (ME&T) sales dipped 1% year over year to around $14.96 billion in the quarter under review.
Construction Industries' sales were down 5% year over year to $6.4 billion on lower sales volume (mainly on reduced sales of equipment to end users), somewhat offset by favorable price realization. Sales were up 6% in North America but plunged 25% in EAME, declined 14% in Asia Pacific and were down 1% in Latin America.
The segment’s total sales were lower than our estimate of $6.8 billion, which had factored in a volume decline of 5.4% and pricing growth of 6.5% for the quarter. The segment reported a volume decline of 7% and a favorable price impact of 3%, which led to the variance.
Sales in the Resource Industries segment were down 7% year over year to around $3.2 billion as lower volumes offset the gains from improved price realization. Sales in EAME plunged 22% while Asia/Pacific reported a year-over-year decline of 9%. Sales in North America were down 3% while Latin America sales were flat compared with the year-ago quarter.
The segment’s first-quarter sales came in line with our projection of $3.2 billion. We had expected the segment’s volume to decline 10.9% and a pricing growth of 4.1% for the quarter. The segment reported a 12.7% decline in volume, which was somewhat offset by a 5.2% favorable impact from pricing.
Sales of the Energy & Transportation segment in the quarter were around $6.7 billion, reflecting growth of 7% driven by improved sales volume and a favorable price realization. The segment reported sales growth in Power Generation (26%), Oil and Gas (19%), and Transportation (9%), which was offset by a 21% decline in sales to the Industrial sector.
For the Energy & Transportation segment, our sales estimate was $6.4 billion, with volume growth at 3.9% and pricing at 2%. The segment’s reported volume growth was 4.6% in the quarter while pricing improved 4%.
The ME&T segment reported an operating profit of $3.4 billion, which reflected an improvement of 30% year over year. The Construction Industries segment’s operating profit dipped 1% year over year to $1.76 billion. The Resource Industries segment’s operating profit dipped 4% year over year to $0.7 billion in the first quarter. The Energy & Transportation segment’s operating profit increased 23% year over year to $1.3 billion.
Financial Products’ total revenues climbed 10% to $991 million from the year-ago quarter due to higher average financing rates in each of the regions and higher average earning assets in North America. The segment's profits were $293 million in the reported quarter, 26% higher than the year-ago quarter.
Cash Position
During the first quarter of 2024, Caterpillar’s operating cash flow was $2.1 billion compared with $1.6 billion in the year-ago quarter. Through the year, the company returned $5.1 billion to shareholders as dividends and share repurchases. CAT ended the quarter with cash and equivalents of around $5 billion, lower than the cash holding of $7 billion at 2023-end.
Expectations for Q2 & 2024
The company anticipates sales in the second quarter of 2024 to be lower than last year’s quarter. Dealer inventories of machines will be down, in line with normal seasonal trends. Pricing will have a favorable impact. Adjusted operating profit margin for the quarter will be similar to the second quarter of 2023. CAT had reported revenues of $17.3 billion and an adjusted operating margin of 21.3% in the second quarter of 2023.
Caterpillar expects revenues in 2024 to be in line with the record 2023 revenues of $67 billion. Adjusted operating profit margin in 2024 is expected to be in the top half of the target range corresponding to the expected level of revenues. At revenues of around $64.5 billion, the company’s projected adjusted operating profit target range is at 16-20%.
Price Performance
Over the past year, the Caterpillar stock has risen 66.3% compared with the industry’s 63.2% growth.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
Applied Industrial has an average trailing four-quarter earnings surprise of 13.9%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.49 per share, which indicates year-over-year growth of 7.8%. Estimates have moved 1% north in the past 60 days. The company’s shares have risen 37.5% in the past year.
The Zacks Consensus Estimate for Chart Industries’ 2024 earnings is pegged at $11.98 per share. The consensus estimate for 2024 earnings has moved 6% north in the past 60 days and suggests year-over-year growth of 93.6%. The company has a trailing four-quarter average earnings surprise of 75.9%. GTLS' shares have risen 18.3% in the past year.
The Zacks Consensus Estimate for Cadre Holdings’ 2024 earnings is pegged at $1.18 per share. The consensus estimate for 2024 earnings has moved 7% north in the past 60 days and suggests year-over-year growth of 16.7%. The company has a trailing four-quarter average earnings surprise of 33%. CDRE's shares have risen 60% in the past year.
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Caterpillar (CAT) Q1 Earnings Top Estimates on Higher Pricing
Caterpillar Inc. (CAT - Free Report) reported first-quarter 2024 adjusted earnings per share of a record $5.60, which beat the Zacks Consensus Estimate of $5.12 by a margin of 9%. The bottom-line figure marked a 14% year-over-year improvement.
Favorable price realization and manufacturing costs, largely reflecting lower freight and improved performance in the Energy & Transportation segment, mainly led to the improvement in CAT’s earnings for the quarter. Both the Construction Industries and Resource Industries segments experienced declines in sales of equipment to end users.
Including one-time items, Caterpillar’s earnings per share were $5.75, up 54% from $3.74 in the year-ago quarter.
Revenues Flat as Low Volumes Offset Prices
The company reported first-quarter revenues of around $15.8 billion, which missed the Zacks Consensus Estimate of $16.1 billion. The top line was flat compared with the year-ago quarter as favorable price realization was offset by lower volumes. Caterpillar witnessed lower sales of equipment to end users.
Improved results in the Energy & Transportation segment were offset by weaker performances in the Construction Industries and Resource Industries segments. North America and Latin America witnessed 8% and 1% year-over-year improvement in sales in the first quarter. This was offset by a 17% sales decline in EAME and a 5% drop in sales in Asia Pacific.
Caterpillar Inc. Price, Consensus and EPS Surprise
Caterpillar Inc. price-consensus-eps-surprise-chart | Caterpillar Inc. Quote
Lower Costs Aid Margin Expansion
In the quarter under review, the cost of sales decreased 4% year over year to $9.7 billion. Gross profit improved 6.6% year over year to $6.1 billion on favorable manufacturing costs mainly due to lower freight costs. The gross margin was 38.8% in the quarter under review, up from 36.3% in the year-ago quarter.
Selling, general and administrative (SG&A) expenses increased 8% year over year to around $1.6 billion. Research and development (R&D) expenses were up 10% to $520 million. This was mainly due to CAT’s ongoing investments aligned with strategic initiatives.
CAT reported an operating profit of $3.5 billion in the first quarter of 2024 compared with $2.7 billion in last year’s quarter. Favorable price realization and the absence of the impact of the divestiture of the company's Longwall business in 2023 helped offset the impact of lower volumes, leading to a 29% year-over-year rise in profits. The operating margin was 22.3% in the reported quarter, up from 17.2% in the year-ago quarter.
Adjusted operating profit was around $3.5 billion in the quarter, up 5% from $3.3 billion in the year-ago quarter as favorable price realization and manufacturing costs offset elevated SG&A and R&D expenses. The adjusted operating margin was 22.2% in the quarter under review compared with 21.1% in the year-ago quarter.
Segmental Performances
Machinery and Energy & Transportation (ME&T) sales dipped 1% year over year to around $14.96 billion in the quarter under review.
Construction Industries' sales were down 5% year over year to $6.4 billion on lower sales volume (mainly on reduced sales of equipment to end users), somewhat offset by favorable price realization. Sales were up 6% in North America but plunged 25% in EAME, declined 14% in Asia Pacific and were down 1% in Latin America.
The segment’s total sales were lower than our estimate of $6.8 billion, which had factored in a volume decline of 5.4% and pricing growth of 6.5% for the quarter. The segment reported a volume decline of 7% and a favorable price impact of 3%, which led to the variance.
Sales in the Resource Industries segment were down 7% year over year to around $3.2 billion as lower volumes offset the gains from improved price realization. Sales in EAME plunged 22% while Asia/Pacific reported a year-over-year decline of 9%. Sales in North America were down 3% while Latin America sales were flat compared with the year-ago quarter.
The segment’s first-quarter sales came in line with our projection of $3.2 billion. We had expected the segment’s volume to decline 10.9% and a pricing growth of 4.1% for the quarter. The segment reported a 12.7% decline in volume, which was somewhat offset by a 5.2% favorable impact from pricing.
Sales of the Energy & Transportation segment in the quarter were around $6.7 billion, reflecting growth of 7% driven by improved sales volume and a favorable price realization. The segment reported sales growth in Power Generation (26%), Oil and Gas (19%), and Transportation (9%), which was offset by a 21% decline in sales to the Industrial sector.
For the Energy & Transportation segment, our sales estimate was $6.4 billion, with volume growth at 3.9% and pricing at 2%. The segment’s reported volume growth was 4.6% in the quarter while pricing improved 4%.
The ME&T segment reported an operating profit of $3.4 billion, which reflected an improvement of 30% year over year. The Construction Industries segment’s operating profit dipped 1% year over year to $1.76 billion. The Resource Industries segment’s operating profit dipped 4% year over year to $0.7 billion in the first quarter. The Energy & Transportation segment’s operating profit increased 23% year over year to $1.3 billion.
Financial Products’ total revenues climbed 10% to $991 million from the year-ago quarter due to higher average financing rates in each of the regions and higher average earning assets in North America. The segment's profits were $293 million in the reported quarter, 26% higher than the year-ago quarter.
Cash Position
During the first quarter of 2024, Caterpillar’s operating cash flow was $2.1 billion compared with $1.6 billion in the year-ago quarter. Through the year, the company returned $5.1 billion to shareholders as dividends and share repurchases. CAT ended the quarter with cash and equivalents of around $5 billion, lower than the cash holding of $7 billion at 2023-end.
Expectations for Q2 & 2024
The company anticipates sales in the second quarter of 2024 to be lower than last year’s quarter. Dealer inventories of machines will be down, in line with normal seasonal trends. Pricing will have a favorable impact. Adjusted operating profit margin for the quarter will be similar to the second quarter of 2023. CAT had reported revenues of $17.3 billion and an adjusted operating margin of 21.3% in the second quarter of 2023.
Caterpillar expects revenues in 2024 to be in line with the record 2023 revenues of $67 billion. Adjusted operating profit margin in 2024 is expected to be in the top half of the target range corresponding to the expected level of revenues. At revenues of around $64.5 billion, the company’s projected adjusted operating profit target range is at 16-20%.
Price Performance
Over the past year, the Caterpillar stock has risen 66.3% compared with the industry’s 63.2% growth.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Applied Industrial Technologies (AIT - Free Report) , Chart Industries, Inc. (GTLS - Free Report) and Cadre Holdings, Inc. (CDRE - Free Report) . AIT currently sports a Zacks Rank #1 (Strong Buy), and GTLS and CDRE carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Applied Industrial has an average trailing four-quarter earnings surprise of 13.9%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.49 per share, which indicates year-over-year growth of 7.8%. Estimates have moved 1% north in the past 60 days. The company’s shares have risen 37.5% in the past year.
The Zacks Consensus Estimate for Chart Industries’ 2024 earnings is pegged at $11.98 per share. The consensus estimate for 2024 earnings has moved 6% north in the past 60 days and suggests year-over-year growth of 93.6%. The company has a trailing four-quarter average earnings surprise of 75.9%. GTLS' shares have risen 18.3% in the past year.
The Zacks Consensus Estimate for Cadre Holdings’ 2024 earnings is pegged at $1.18 per share. The consensus estimate for 2024 earnings has moved 7% north in the past 60 days and suggests year-over-year growth of 16.7%. The company has a trailing four-quarter average earnings surprise of 33%. CDRE's shares have risen 60% in the past year.