Friday, July 22, 2011

Caterpillar (CAT) Misses EPS Estimates, but Beats on the Top Line and Raises Guidance

Caterpillar (CAT), which essentially has become the Apple (AAPL) of heavy machinery, is out this morning and while reporting stellar numbers - was a tad short on the bottom line.  The stock is being punished in premarket to the tune of 5% since expectations are now very high going into every Caterpillar quarter.  Technically, it is sitting just over the 50 day moving average.

CAT is blaming some missed revenue opportunities on Japan, so this seems to be a bit of an overreaction, but the stock is quite rich.

  • The disaster in Japan had a $200 million negative impact on second-quarter sales, was negative on costs and efficiency and lowered operating profit nearly $60 million.  However, the negative impacts from Japan are now behind us," Oberhelman added.
Estimates were for $1.79, and $13.52B in revenue. Full report here.

  • Caterpillar said net income rose to $1.02 billion, or $1.52 per share, in the second quarter, compared with $707 million, or $1.09 per share, a year earlier.  However, the latest period included certain acquisition-related expenses. Excluding those items, Caterpillar earned $1.72 a share.
  • Analysts had expected Caterpillar to report earnings of $1.74 a share on revenue of $13.56 billion.
  • Revenue at the economic bellwether rose 37 percent to $14.23 billion from $10.4 billion a year ago. 

Guidance raise:
  • Excluding the impact of Bucyrus, we are raising expectations for 2011.  We expect sales and revenues in a range of $54 to $56 billion and profit per share of $6.75 to $7.25.  That is an improvement from our previous outlook of $52 to $54 billion of sales and revenues and profit per share of $6.25 to $6.75.
  • We expect that Bucyrus will add about $2 billion of sales in 2011 and negatively impact full-year profit by about $0.50 per share.  In total, including Bucyrus, we expect sales and revenues in a range of $56 to $58 billion and profit per share of $6.25 to $6.75

Caterpillar general economic views:

  • "While the economic recovery in the United States continues to be weaker than many expected, we're forecasting continued moderate economic expansion.  That, coupled with stronger growth in the developing world, is driving higher sales for Caterpillar.  
  • There's been quite a bit of concern in the media over the past few months centered on China.  While we've seen some softening of growth in China, dealer deliveries to end users were up in the second quarter of 2011 compared with the second quarter of last year and grew at a faster rate than the overall industry in China.  In our view, China is doing a good job of balancing growth and inflation, and our expectations for China remain positive.  
  • That said, we can't lose sight of the significant growth that's going on around the world outside the United States and China.  Economic activity and our business in Latin America, the Middle East, Africa, CIS and greater Asia are robust," Oberhelman added.  
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