Caterpillar stock dips on weak outlook

Caterpillar Inc. (CAT) reported a 63% jump in earnings for the third quarter as improved demand across the three primary segments, including a rise in dealer inventories, drove revenue higher. Despite the results exceeding analysts’ expectations, shares of the company dropped over 6% in the premarket session due to weak outlook.

Total sales and revenues grew 18% to $13.51 billion. The increase was due to higher sales volume from the three primary segments. Favorable price realization, primarily in Resource Industries, also contributed to the sales improvement. This was partially offset by unfavorable currency impacts on a weaker Australian dollar and Brazilian real.

Net profit climbed 63% to $1.73 billion or $2.88 per share. Excluding restructuring costs and a net tax benefit to adjust deferred tax balances, earnings soared 47% to $2.86 per share.

The global workforce increased about 8,200 to 123,100 from the end of the third quarter of 2017, primarily due to higher production volumes.

For the third quarter, sales from Construction Industries grew 16% on higher sales volume for construction equipment. In North America, the sales growth of 22% was mostly due to higher demand for new equipment, primarily to support oil and gas activities, including pipelines, and non-residential building construction activities.

Resource Industries’ total sales jumped 35% on higher demand for both mining and heavy construction equipment. Commodity market fundamentals remained positive, contributing to higher mining equipment sales. Also, increased sales to heavy construction and quarry and aggregate customers were driven by positive global economic growth.

Energy & Transportation’s total sales increased 15% on higher sales volume across all applications except Industrial. Financial Products’ segment revenues rose 9% on higher average financing rates and higher average earning assets in North America and Asia/Pacific as well as a favorable impact from returned or repossessed equipment.

Looking ahead into the full year 2018, the company lifted its EPS guidance to the range of $10.65 to $11.65 from the prior estimate of $10.50 to $11.50 range. However, adjusted EPS forecast has been reiterated in the range of $11 to $12.

Most end markets continue to improve. Order rates and backlog remain healthy. In the fourth quarter, price realization, operational excellence, and cost discipline are expected to more than offset higher material and freight costs, including tariffs.

Shares of Caterpillar ended Monday’s regular session down 2.03% at $128.71 on the NYSE. The stock has fallen over 2% in the past year and over 18% in the year so far.

Get access to timely and accurate verbatim transcripts that are published within hours of the event.