Caterpillar falls short of analysts’ estimates for earnings and revenue in Q1

Written by: Wajeeh Khan
April 29, 2020
  • Caterpillar records £8.54 billion in revenue in Q1 and makes £1.29 of adjusted earnings per share.
  • The industrial giant cites COVID-19 uncertainty for not giving financial guidance for 2020.
  • 75% of Caterpillar's primary production factories continued operations amidst the Coronavirus.

Caterpillar Inc. (NYSE: CAT) said on Tuesday that the Coronavirus pandemic weighed on demand in the mining and construction sectors that fuelled a 21% decline in sales in the first quarter.

The construction machinery and equipment company recorded its revenue at £8.54 billion in Q1 versus £10.87 billion that it posted in the same quarter last year. The company attributed the decline to lower demand due to COVID-19 and changes in dealer inventories. Wall Street had estimated Caterpillar’s revenue in the first quarter to print at £8.79 billion.

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

Caterpillar boasted £1.29 of adjusted earnings per share in the recent quarter that fell short of the expert’s forecast of £1.36 per share in Q1. In the comparable quarter last year, the industrial giant had made a significantly higher £2.37 of adjusted profit per share.

Despite the downbeat financial report, Caterpillar climbed 0.2% in extended trading on Tuesday.

CEO Jim Umpleby’s comments on Tuesday

CEO Jim Umpleby commented on the earnings report and stated:

“We have taken decisive actions to enhance our strong financial position, while continuing to execute our strategy for profitable growth. Caterpillar has faced and overcome many challenges in our 95-year history. Our goal is to emerge from the pandemic an even stronger company.”

The equipment company said on Tuesday that the Coronavirus driven economic uncertainty makes it difficult for Caterpillar to give meaningful financial guidance for 2020.

As per the company, roughly 75% of its primary production factories continued operations amidst the health crisis. A handful of facilities that were previously shut down, it added, have now resumed production.

In a bid to shore up its cash reserves, Caterpillar suspended annual bonuses and salary increases this year for all of the company’s executives and many of its employees.

Tip: looking for an app to invest wisely? Trade safely by signing-up with our preferred choice, eToro: visit & create account

Morgan Stanley downgrades Caterpillar

Earlier this week, Morgan Stanley downgraded Caterpillar’s stock from “equal weight” to “underweight” on Monday citing a higher downside risk in non-residential construction.

At £93 per share, Caterpillar is currently a little under 25% down year to date in the stock market. In March, the stock dropped to as low as £74 per share. Caterpillar’s performance in the stock market in 2019 was fairly upbeat with an annual gain of more than 15%.

At the time of writing, the industrial equipment manufacturer has a market cap of £51.15 billion and a price to earnings ratio of 11.08.