We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Caterpillar (CAT) Down 1.8% Since Last Earnings Report: Can It Rebound?
Read MoreHide Full Article
A month has gone by since the last earnings report for Caterpillar (CAT - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Caterpillar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Caterpillar Q2 Earnings & Revenues Beat Estimates, Up Y/Y
Caterpillar reported record adjusted earnings per share of $5.55 in the second quarter of 2023, which beat the Zacks Consensus Estimate of adjusted earnings per share of $4.51 by a margin of 23%. The bottom-line figure marked a 74.5% improvement year on year. Despite unfavorable manufacturing costs, higher sales volumes and favorable price realization led to the solid improvement in earnings for the quarter.
Including one-time items, Caterpillar’s earnings per share was $5.67, up 81% from the prior-year quarter’s figure of $3.13.
Revenues Up on High Volumes & Prices
The company reported second-quarter revenues of around $17.3 billion, which surpassed the Zacks Consensus Estimate of $16.5 billion. The top line improved 22% from the year-ago quarter, aided by higher sales volumes and favorable price realization. Sales growth was noted across all segments, led by 32% growth in North America.
Higher Sales Offset Cost Impact on Margins
In the quarter under review, the cost of sales increased 11% year over year to around $11 billion. Manufacturing costs were higher in the quarter, reflecting inflated material costs. Gross profit improved 46% year over year to $6.25 billion on higher sales. The gross margin was 36.1% in the quarter under review, up from 30% in the prior-year quarter.
Selling, general and administrative (SG&A) expenses increased 7% year over year to around $1.53 billion. Research and development expenses were up 10% to $0.5 million. This was mainly due to CAT’s investments aligned with strategic initiatives.
Caterpillar reported an operating profit of $3.65 billion in the second quarter of 2023, compared with $1.94 billion in the last year’s quarter. Gains from increased volumes and favorable price realization offset higher costs, leading to an 88% year-over-year jump in profits.
The operating margin was 21.1% in the reported quarter, up from 13.6% in the prior-year quarter. Adjusted operating profit was $3.68 billion in the quarter, up 87% from $1.97 billion in the last year’s quarter. The adjusted operating margin was 21.3% in the second quarter of 2023 versus 13.8% in the year-ago quarter.
Solid Segment Performances
Machinery and Energy & Transportation (ME&T) sales rose 22% year over year to $16.5 billion in the quarter under review. Construction Industries' sales were up 19% year over year to $7.2 billion on favorable price realization and higher sales volumes. Sales were up 32% in North America and 20% in EAME. Sales were flat in Asia/Pacific and declined 11% in Latin America.
Sales in the Resource Industries segment gained 20% year over year to around $3.6 billion on higher sales volume and improved price realization. The segment witnessed higher sales of equipment to end users, which was offset by lower aftermarket parts sales volume. Growth was noted across all regions, led by North America with year-over-year growth of 31%, followed by Asia/Pacific registering 18% growth. Latin America and EAME delivered growth of 15% and 6%, respectively.
Sales of the Energy & Transportation segment in the quarter were around $7.2 billion, reflecting growth of 27% aided by improved sales in all regions on higher sales volume and favorable price realization. The segment reported sales growth across all applications, which are Oil and Gas (43%), Power Generation (39%) Industrial (18%) and Transportation (12%).
The ME&T segment reported an operating profit of $3.55 billion, which reflected an improvement of 97% year over year. The Construction Industries segment witnessed an 82% surge in operating profit to $1.8 billion. The Resource Industries segment’s operating profit soared 108% year over year to $0.7 billion in the second quarter. The Energy & Transportation segment’s operating profit increased 93% year over year to $1.27 billion. Favorable price realization and volumes across all segments helped offset the impact of higher costs, resulting in the improvement in respective segments’ profits.
Financial Products’ total revenues climbed 16% to $923 million from the prior-year quarter due to higher average financing rates. The segment's profits were $240 million in the reported quarter, which was 11% higher than the last year, due to lower provision for credit losses at Cat Financial. However, higher SG&A expenses had a somewhat offsetting impact.
Cash Position
During the first half of 2023, Caterpillar’s operating cash flow was $4.8 billion, compared with $2.5 billion in the prior-year period. Through the quarter, the company returned $2 billion to shareholders as dividends and share repurchases. The company ended the second quarter with cash and equivalents of around $7.4 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 13.48% due to these changes.
VGM Scores
Currently, Caterpillar has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Caterpillar has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Caterpillar (CAT) Down 1.8% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Caterpillar (CAT - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Caterpillar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Caterpillar Q2 Earnings & Revenues Beat Estimates, Up Y/Y
Caterpillar reported record adjusted earnings per share of $5.55 in the second quarter of 2023, which beat the Zacks Consensus Estimate of adjusted earnings per share of $4.51 by a margin of 23%. The bottom-line figure marked a 74.5% improvement year on year. Despite unfavorable manufacturing costs, higher sales volumes and favorable price realization led to the solid improvement in earnings for the quarter.
Including one-time items, Caterpillar’s earnings per share was $5.67, up 81% from the prior-year quarter’s figure of $3.13.
Revenues Up on High Volumes & Prices
The company reported second-quarter revenues of around $17.3 billion, which surpassed the Zacks Consensus Estimate of $16.5 billion. The top line improved 22% from the year-ago quarter, aided by higher sales volumes and favorable price realization. Sales growth was noted across all segments, led by 32% growth in North America.
Higher Sales Offset Cost Impact on Margins
In the quarter under review, the cost of sales increased 11% year over year to around $11 billion. Manufacturing costs were higher in the quarter, reflecting inflated material costs. Gross profit improved 46% year over year to $6.25 billion on higher sales. The gross margin was 36.1% in the quarter under review, up from 30% in the prior-year quarter.
Selling, general and administrative (SG&A) expenses increased 7% year over year to around $1.53 billion. Research and development expenses were up 10% to $0.5 million. This was mainly due to CAT’s investments aligned with strategic initiatives.
Caterpillar reported an operating profit of $3.65 billion in the second quarter of 2023, compared with $1.94 billion in the last year’s quarter. Gains from increased volumes and favorable price realization offset higher costs, leading to an 88% year-over-year jump in profits.
The operating margin was 21.1% in the reported quarter, up from 13.6% in the prior-year quarter. Adjusted operating profit was $3.68 billion in the quarter, up 87% from $1.97 billion in the last year’s quarter. The adjusted operating margin was 21.3% in the second quarter of 2023 versus 13.8% in the year-ago quarter.
Solid Segment Performances
Machinery and Energy & Transportation (ME&T) sales rose 22% year over year to $16.5 billion in the quarter under review. Construction Industries' sales were up 19% year over year to $7.2 billion on favorable price realization and higher sales volumes. Sales were up 32% in North America and 20% in EAME. Sales were flat in Asia/Pacific and declined 11% in Latin America.
Sales in the Resource Industries segment gained 20% year over year to around $3.6 billion on higher sales volume and improved price realization. The segment witnessed higher sales of equipment to end users, which was offset by lower aftermarket parts sales volume. Growth was noted across all regions, led by North America with year-over-year growth of 31%, followed by Asia/Pacific registering 18% growth. Latin America and EAME delivered growth of 15% and 6%, respectively.
Sales of the Energy & Transportation segment in the quarter were around $7.2 billion, reflecting growth of 27% aided by improved sales in all regions on higher sales volume and favorable price realization. The segment reported sales growth across all applications, which are Oil and Gas (43%), Power Generation (39%) Industrial (18%) and Transportation (12%).
The ME&T segment reported an operating profit of $3.55 billion, which reflected an improvement of 97% year over year. The Construction Industries segment witnessed an 82% surge in operating profit to $1.8 billion. The Resource Industries segment’s operating profit soared 108% year over year to $0.7 billion in the second quarter. The Energy & Transportation segment’s operating profit increased 93% year over year to $1.27 billion. Favorable price realization and volumes across all segments helped offset the impact of higher costs, resulting in the improvement in respective segments’ profits.
Financial Products’ total revenues climbed 16% to $923 million from the prior-year quarter due to higher average financing rates. The segment's profits were $240 million in the reported quarter, which was 11% higher than the last year, due to lower provision for credit losses at Cat Financial. However, higher SG&A expenses had a somewhat offsetting impact.
Cash Position
During the first half of 2023, Caterpillar’s operating cash flow was $4.8 billion, compared with $2.5 billion in the prior-year period. Through the quarter, the company returned $2 billion to shareholders as dividends and share repurchases. The company ended the second quarter with cash and equivalents of around $7.4 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 13.48% due to these changes.
VGM Scores
Currently, Caterpillar has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Caterpillar has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.