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Likely Coronavirus Impact on Caterpillar's (CAT) Q1 Earnings
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Caterpillar Inc. (CAT - Free Report) is scheduled to report first-quarter 2020 results on Apr 28, before the opening bell.
In the trailing four quarters, the mining and construction equipment behemoth’s beat estimates on two occasions while missing the same twice. It has a trailing four-quarter negative earnings surprise of 0.12%, on average.
Q1 Estimates
The Zacks Consensus Estimate for the first-quarter 2020 earnings is currently pegged at $1.77, indicating a decline of 39.8% from the prior-year quarter. The figure has also moved south by 9% over the past 30 days.
Per the Federal Reserve, industrial production contracted 7.5% in the first quarter of 2020 — the steepest since second-quarter 2009. Manufacturing output also slumped at an annual rate of 7.1% in the first quarter, the sharpest since first-quarter 2009. Meanwhile, per the Institute for Supply Management, the Manufacturing Purchasing Managers’ Index (PMI) after recording 50.9 in January, and 50.1 in February (indicating expansion), contracted again to 49.1% in March. These figures clearly indicate that the manufacturing sector has been impacted by the coronavirus pandemic and energy market volatility. It is quite obvious that Caterpillar hasn’t been immune to this trend in the first quarter.
Before the coronavirus outbreak struck, Caterpillar was already bearing the brunt of the protracted U.S-China trade war and weak global demand. This was evident from Caterpillar’s 2019-end order backlog that stood at $13.7 billion, a sequential decline of $900 million. A lower backlog and the company’s steps to cut production to match demand is likely to have impacted Caterpillar’s first-quarter performance. The company also announced that its supply chain has been disrupted owing to the pandemic. Further, it had to temporarily suspend operations at certain facilities on account of weak demand and restrictions imposed by governments to contain the spread of the virus. All these factors and record low oil prices are expected to get reflected on the to-be-reported quarter’s results.
The Zacks Consensus Estimate for first-quarter revenues is $11.13 billion, suggesting a decline of 17.3% from the prior-year quarter.
In addition, material cost inflation is likely to have affected Caterpillar’s margins. However, the company’s cost reduction initiatives are likely to get reflected in the first-quarter performance.
How Will The Segments Fare?
For the Machinery, Energy & Transportation segment, which contributes around 90% of the company’s total revenues, the Zacks Consensus Estimate for first-quarter 2020 is pegged at $10.4 billion, suggesting a decline of 17% from the prior-year quarter.
The Zacks Consensus Estimate for the Resource Industries segment’s external sales for the first quarter is pegged at $2,237 million, indicating year-over-year decline of 15%. Low commodity prices in the wake of the pandemic have compelled mining customers cut capital expenditures and suspend operations due to government mandates all over the world. This is likely to get reflected in the segment’s sales in the first quarter. Sales for the Resource segment are likely to be weak across all regions on account of the coronavirus outbreak.
The Zacks Consensus Estimate for the Construction segment’s external sales is projected at $4,426 million for the to-be-reported quarter, suggesting year-over-year decline of 24%. This notably indicates the impact of the pandemic across all regions, particularly China as it represents about 10% to 15% of the segment’s sales.
For the Energy & Transportation segment, the Zacks Consensus Estimate for external sales is currently at $3,776 million, indicating a decline of 11% from the year-ago quarter. The segment’s results in the first quarter are likely to reflect the impact of the coronavirus and record low oil prices.
For the to-be-reported quarter, the Zacks Consensus Estimate for operating profit for the Machinery, Energy & Transportation segment is pegged at $1,146 million, indicating a decline of 47% from the prior-year quarter. The Resource Industries segment is anticipated to report an operating profit of $330 million, suggesting a decline of 43% from the prior-year quarter. The Zacks Consensus Estimate for the Energy & Transportation segment is $681 million, suggesting a decline of 19% from the year-ago reported figure. The Zacks Consensus Estimate for the Construction segment’s operating profit is at $572 million, suggesting a decline of 47% from the prior-year quarter.
What Our Model Indicates
Our proven model does not conclusively predict a beat for Caterpillar this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here as you will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Caterpillar’s Earnings ESP is -1.31%.
Zacks Rank: Caterpillar currently carries a Zacks Rank #4 (Sell).
Price Performance
Shares of the company have fallen 22.1% in a year, compared with the industry’s decline of 24.6%.
Stocks Poised to Beat Earnings Estimates
Here are a few Industrial Products stocks which you may consider as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming releases.
Ball Corporation has an Earnings ESP of +3.00% and a Zacks Rank of 3.
Axon Enterprise, Inc. has an Earnings ESP of +2.13% and a Zacks Rank #3.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
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Likely Coronavirus Impact on Caterpillar's (CAT) Q1 Earnings
Caterpillar Inc. (CAT - Free Report) is scheduled to report first-quarter 2020 results on Apr 28, before the opening bell.
In the trailing four quarters, the mining and construction equipment behemoth’s beat estimates on two occasions while missing the same twice. It has a trailing four-quarter negative earnings surprise of 0.12%, on average.
Q1 Estimates
The Zacks Consensus Estimate for the first-quarter 2020 earnings is currently pegged at $1.77, indicating a decline of 39.8% from the prior-year quarter. The figure has also moved south by 9% over the past 30 days.
Caterpillar Inc. Price and EPS Surprise
Caterpillar Inc. price-eps-surprise | Caterpillar Inc. Quote
Factors at Play
Per the Federal Reserve, industrial production contracted 7.5% in the first quarter of 2020 — the steepest since second-quarter 2009. Manufacturing output also slumped at an annual rate of 7.1% in the first quarter, the sharpest since first-quarter 2009. Meanwhile, per the Institute for Supply Management, the Manufacturing Purchasing Managers’ Index (PMI) after recording 50.9 in January, and 50.1 in February (indicating expansion), contracted again to 49.1% in March. These figures clearly indicate that the manufacturing sector has been impacted by the coronavirus pandemic and energy market volatility. It is quite obvious that Caterpillar hasn’t been immune to this trend in the first quarter.
Before the coronavirus outbreak struck, Caterpillar was already bearing the brunt of the protracted U.S-China trade war and weak global demand. This was evident from Caterpillar’s 2019-end order backlog that stood at $13.7 billion, a sequential decline of $900 million. A lower backlog and the company’s steps to cut production to match demand is likely to have impacted Caterpillar’s first-quarter performance. The company also announced that its supply chain has been disrupted owing to the pandemic. Further, it had to temporarily suspend operations at certain facilities on account of weak demand and restrictions imposed by governments to contain the spread of the virus. All these factors and record low oil prices are expected to get reflected on the to-be-reported quarter’s results.
The Zacks Consensus Estimate for first-quarter revenues is $11.13 billion, suggesting a decline of 17.3% from the prior-year quarter.
In addition, material cost inflation is likely to have affected Caterpillar’s margins. However, the company’s cost reduction initiatives are likely to get reflected in the first-quarter performance.
How Will The Segments Fare?
For the Machinery, Energy & Transportation segment, which contributes around 90% of the company’s total revenues, the Zacks Consensus Estimate for first-quarter 2020 is pegged at $10.4 billion, suggesting a decline of 17% from the prior-year quarter.
The Zacks Consensus Estimate for the Resource Industries segment’s external sales for the first quarter is pegged at $2,237 million, indicating year-over-year decline of 15%. Low commodity prices in the wake of the pandemic have compelled mining customers cut capital expenditures and suspend operations due to government mandates all over the world. This is likely to get reflected in the segment’s sales in the first quarter. Sales for the Resource segment are likely to be weak across all regions on account of the coronavirus outbreak.
The Zacks Consensus Estimate for the Construction segment’s external sales is projected at $4,426 million for the to-be-reported quarter, suggesting year-over-year decline of 24%. This notably indicates the impact of the pandemic across all regions, particularly China as it represents about 10% to 15% of the segment’s sales.
For the Energy & Transportation segment, the Zacks Consensus Estimate for external sales is currently at $3,776 million, indicating a decline of 11% from the year-ago quarter. The segment’s results in the first quarter are likely to reflect the impact of the coronavirus and record low oil prices.
For the to-be-reported quarter, the Zacks Consensus Estimate for operating profit for the Machinery, Energy & Transportation segment is pegged at $1,146 million, indicating a decline of 47% from the prior-year quarter. The Resource Industries segment is anticipated to report an operating profit of $330 million, suggesting a decline of 43% from the prior-year quarter. The Zacks Consensus Estimate for the Energy & Transportation segment is $681 million, suggesting a decline of 19% from the year-ago reported figure. The Zacks Consensus Estimate for the Construction segment’s operating profit is at $572 million, suggesting a decline of 47% from the prior-year quarter.
What Our Model Indicates
Our proven model does not conclusively predict a beat for Caterpillar this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here as you will see below.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Caterpillar’s Earnings ESP is -1.31%.
Zacks Rank: Caterpillar currently carries a Zacks Rank #4 (Sell).
Price Performance
Shares of the company have fallen 22.1% in a year, compared with the industry’s decline of 24.6%.
Stocks Poised to Beat Earnings Estimates
Here are a few Industrial Products stocks which you may consider as our model shows that these too have the right combination of elements to post an earnings beat in their upcoming releases.
TPI Composites, Inc. (TPIC - Free Report) has an Earnings ESP of +74.55% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ball Corporation has an Earnings ESP of +3.00% and a Zacks Rank of 3.
Axon Enterprise, Inc. has an Earnings ESP of +2.13% and a Zacks Rank #3.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>