Caterpillar Defies Slowdown Fears as Profit Tops Estimates
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Caterpillar Inc. shook off concerns of a global slowdown in economic activity, posting profit that exceeded Wall Street’s expectations amid resilient demand for the company’s iconic yellow machinery across all its major business segments.
The bellwether for the global economy reported adjusted second-quarter earnings and revenue on Aug. 1 that beat analysts’ expectations as demand surged in all its major business segments. The bullish results come as economists worry that economic growth is slowing from the Americas to Europe and Asia, exacerbated by rising inflation and surging interest rates.
Shares rose 3.5% to a record $274.49 at 9:31 a.m. in New York, the biggest intraday increase since June 13.
Caterpillar’s adjusted profit of $5.55 a share topped the $4.54 average estimate of analysts polled by Bloomberg, helped by successful price hikes to customers of its machinery, along with surging sales.
Our second-quarter financial results are now available: https://t.co/gZVQFTRcSY pic.twitter.com/ManbvLGHCq — CaterpillarInc (@CaterpillarInc) August 1, 2023
The Irving, Texas-based company is one of the world’s biggest producers of heavy machinery, with its yellow bulldozers, excavators and trucks dotting construction sites, mines and oil fields across the globe.
“Our results continue to reflect healthy demand across most end markets for our products and services,” CEO Jim Umpleby said during the Aug. 1 earnings call. “It was another strong quarter.”
Caterpillar expects lower revenue in its third quarter compared with the second quarter and restructuring costs of about $700 million for the year, according to its earnings statement.
Umpleby also warned of softer sales in China than previously anticipated in his comments to analysts, citing further weakness in excavators most used for Chinese construction projects. Still, the CEO said Caterpillar’s full-year results will be better than expected.
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“We continue to see improvement in the supply chain, which allowed us to increase production in the quarter,” Umpleby said. “However, areas of challenge remain, particularly for large engines, which impacts energy and transportation, and some of our larger machines.”
Rising freight and material costs, coupled with global supply chain troubles, have been large hurdles for the producer since the beginning of the pandemic in 2020, eating into profit margins. The company has repeatedly raised prices of its equipment to offset such pressures, with success.
