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Caterpillar stock dips on weak Q4 earnings

Caterpillar Inc. (CAT) swung to a profit in the fourth quarter from a loss last year, as improved demand across the three primary segments, including a rise in dealer inventories, drove revenue higher. The top line exceeded analysts’ expectations while the bottom line missed consensus estimates. Following this, the stock inched down over 6% in the premarket session.

Net profit was $1.05 billion or $1.80 per share compared to a loss of $1.30 billion or $2.18 per share in the previous year quarter. Adjusted earnings increased 18% to $2.55 per share.

Total sales and revenues grew 11% to $14.3 billion. The increase was due to higher sales volume from the three primary segments. Favorable price realization also contributed to the sales improvement. This was partially offset by unfavorable currency impacts on a stronger US dollar.

Caterpillar fourth quarter 2018 earnings snapshot
Caterpillar Q4 2018 Earnings Infographic

Looking ahead into the full year 2019, the company expects earnings in the range of $11.75 to $12.75 per share. The forecast assumes a modest sales growth based on the fundamentals of its diverse end markets as well as the macroeconomic and geopolitical environment.

Beginning in 2019, the company does not plan to exclude restructuring costs from adjusted profit per share as these costs are expected to return to normalized levels.

Related: Caterpillar Q3 2018 Earnings

The global workforce increased about 7,300 to 124,000 as of December 31, 2018, from the prior year, primarily due to higher production volumes.

For the fourth quarter, sales from Construction Industries grew 8% on higher sales volume for construction equipment. In North America, the sales growth of 17% was driven by higher demand for new equipment, with about half due to rise in dealer inventories. The increase in demand was primarily to support oil and gas activities, including pipelines, and non-residential building construction activities.

Also read: Caterpillar Q4 2018 earnings call transcript

Resource Industries’ total sales jumped 21% on higher demand for both mining and heavy construction equipment, including quarry and aggregate. Mining activities were robust as commodity market fundamentals remained positive, and increased non-residential construction activities drove higher sales.

Energy & Transportation’s total sales increased 11% on higher sales volume across all applications except Industrial, which was flat. Financial Products’ segment revenues rose 4% on higher average financing rates and higher average earning assets in North America and Asia/Pacific. This was partially offset by an unfavorable impact from returned or repossessed equipment in Europe and Latin America.

Shares of Caterpillar ended Friday’s regular session up 3.11% at $136.86 on the NYSE. The stock has fallen over 18% in the past year while it has risen over 18% in the past three months.


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