Yahoo Finance Caterpillar (CAT) Q1 Earnings & Revenues Beat, Increase Y/Y
Caterpillar Inc. CAT reported first-quarter 2023 adjusted earnings per share of $4.91, which beat the Zacks Consensus Estimate of $3.79 by a margin of 30%. The bottom-line figure marked a 70.5% improvement year on year. Despite unfavorable manufacturing costs, higher sales volumes and favorable price realization led to an improvement in CAT’s earnings for the quarter.
Including one-time items, Caterpillar’s earnings per share were $3.74, up 31% from the prior-year quarter’s $2.86.
Revenues Up On Higher Volumes & Price Realization
The company reported first-quarter revenues of around $15.9 billion that surpassed the Zacks Consensus Estimate of $15.2 billion. The top line improved 17% from the year-ago quarter aided by increased sales volumes and favorable price realization.
Caterpillar Inc. Price, Consensus and EPS Surprise
Caterpillar Inc. price-consensus-eps-surprise-chart | Caterpillar Inc. Quote
Higher sales of equipment to end users offset by lower service sales volume, led to the improvement in sales volumes. Unfavorable currency impacts related to the euro, Australian dollar and Japanese yen had a dampening effect. Sales growth was noted across all segments, led by 30% growth in North America.
Higher Sales Offset Cost Impact on Margins
In the quarter under review, the cost of sales increased 6% year over year to around $10.1 billion. Manufacturing costs were higher in the quarter reflecting inflated material costs. Gross profit improved 43% year over year to $5.76 billion aided by higher sales volumes. The gross margin was 36.3% in the quarter under review, up from 29.7% in the prior-year quarter.
Selling, general and administrative expenses increased 9% year over year to around $1,463 million. Research and development expenses were up 3% to $472 million.
CAT reported an operating profit of $2,731 million in the first quarter of 2023, compared with $1,855 million in the last year’s quarter. Gains from increased volumes and favorable price realization were offset by the impact of the divestiture of the company's Longwall business as well as higher manufacturing costs (mainly material costs).
The operating margin was 17.2% in the reported quarter, up from 13.7% in the prior-year quarter. Adjusted operating profit was $3,342 million in the quarter, up 79% from $1,868 million in the last year’s quarter. The adjusted operating margin was 21.1% in the first quarter of 2023 versus 13.7% in the year-ago quarter.
Solid Segment Performances
Machinery and Energy & Transportation (ME&T) sales rose 17% year over year to $15.1 billion in the quarter under review. Construction Industries' sales were up 10% year over year to $6.7 billion on favorable price realization which was somewhat offset by lower volumes and unfavorable currency impacts. Sales were up 30% in North America, 10% in Latin America, 9% in EAME and 1% in Asia/Pacific.
Sales in the Resource Industries segment gained 21% year over year to around $3.4 billion on higher sales volume and improved price realization. The segment witnessed higher sales of equipment to end users, which was offset by lower aftermarket parts sales volume. Growth was noted across all regions, led by Asia Pacific with year-over-year growth of 31%, followed by North America registering 28% growth. Latin America and EAME delivered growth of 19% and 1%, respectively.
Sales of the Energy & Transportation segment in the quarter were around $6.3 billion, reflecting growth of 24% aided by improved sales in all regions on higher sales volume and favorable price realization. The segment reported sales growth across all applications – Oil and Gas (39%), Power Generation (27%) Industrial (23%) and Transportation (14%).
The ME&T segment reported an operating profit of $2,614 million, which reflected an improvement of 52% year over year. The Construction Industries segment witnessed a 69% surge in operating profit to $1,790 million. The Resource Industries segment’s operating profit soared 112% year over year to $764 million in the first quarter. The Energy & Transportation segment’s operating profit increased 96% year over year to $1,057 million. Favorable price realization across all segments helped offset the impact of higher costs, resulting in the improvement in respective segments’ profits.
Financial Products’ total revenues climbed 15% to $902 million from the prior-year quarter due to higher average financing rates in all regions. The segment's profits were $238 million in the reported quarter which was a 3% decline year on year, mainly due to unfavorable impacts from equity securities, currency exchange losses and mark-to-market adjustments on derivative contracts. These unfavorable impacts were partially offset by the higher net yield on average earning assets and lower provision for credit losses at Cat Financial.
Cash Position
During the first quarter of 2023, Caterpillar’s operating cash flow was $1.6 billion, compared with $0.3 billion in the prior-year quarter. The company returned $1 billion to shareholders through dividends and share repurchases in the quarter. CAT ended the reported quarter with cash and equivalents of $6.8 billion.
Price Performance
Over the past year, Caterpillar stock has declined 3.3%, compared with the industry’s 1.5% growth.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
Some top-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW and OI Glass Inc. OI. WIRE and MTW sport a Zacks Rank #1 (Strong Buy) at present, while OI carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved north by 17.7% in the past 60 days. Its shares gained 20% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares gained 15% in the last year.
The Zacks Consensus Estimate for OI Glass’ 2023 earnings per share is pegged at $2.59. The consensus estimate for 2023 earnings rose 0.8% in the last 60 days. OI has a trailing four-quarter average earnings surprise of 16.5%. Its shares gained 61.6% in the last year.
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