Caterpillar Stock Is Dropping After Earnings Beat Estimates. Inflation Claims Another Victim.
Caterpillar earth-moving equipment
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Heavy machinery maker Caterpillar reported first-quarter numbers that beat Wall Street expectations. Pricing gains in the quarter almost kept up with inflation.
Shares, however, were down early Thursday, shortly after the results were released. Something is troubling investors a little, and it’s difficult to figure out exactly what that is.
Caterpillar (ticker: CAT) reported earnings per share of $2.88 from $13.6 billion in sales. Analysts were looking for EPS of $2.60 from about $13.3 billion in sales. A year ago, in the first quarter of 2021, Caterpillar reported EPS of $2.87 from $11.9 billion in sales.
Caterpillar stock was off about 1.7% in premarket trading. The overall market was looking stronger. S&P 500 and Dow Jones Industrial Average futures gained 1.4% and 0.8%, respectively.
There isn’t all that much to pick at in Caterpillar’s results. Profit margins improved sequentially. Operating profit margins came in at 13.7%, up from 11.7% reported for the fourth quarter of 2021. But first-quarter margins were down 1.6 percentage points from the year-ago quarter.
Price vs. cost hurt results in the quarter. That could be a concern, but management said it expects pricing to “more than offset” higher costs in 2022.
For the first quarter, pricing was up about 6% year over year, adding about $704 million to the company’s top line. That almost offset higher costs of about $804 million. Overall operating profit rose about $41 million year over year, to about $1.9 billion. Higher sales volumes, along with higher pricing, added to revenue and profits.
The company’s lending unit results earned $238 million in profit, down from $244 million in the first quarter of 2021. The provision for bad debts rose a little, but used equipment pricing was up too, offsetting some of that headwind. Higher credit provisions could also be unnerving investors.
Still, things look OK. Caterpillar doesn’t provide detailed guidance, but says it expects second-quarter sales to be up compared with the first quarter. And sales rose in each of Cat’s three segments: mining, energy and construction related industries.
“I’m proud of our global team’s performance as they achieved double-digit sales growth despite ongoing supply chain challenges,” said CEO Jim Umpleby in the company’s news release. “We remain focused on supporting our customers and executing our strategy for long-term profitable growth.”
Management hosts a conference call at 8:30 a.m. Eastern time to discuss results. Analysts and investors will be eager to hear more about demand and cost trends amid rising interest rates and inflation.
Write to Al Root at [email protected]
