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Caterpillar (CAT) Reports Retail Sales Decline of 20% in July
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Caterpillar Inc.’s (CAT - Free Report) global retail sales declined 20% in the three-month period ended July 2020, highlighting a slight improvement from the slump of 23% in June. The company had last reported a decline of this magnitude in February 2016. Notably, this marks the eighth consecutive month of global retail sales decline for the mining and construction equipment behemoth. The current downside trend can be attributed to overall weak demand primarily on account of the COVID-19 pandemic.
Breakdown of July Performance
North America fared the worst during the month, reporting a plunge of 38%, followed by Latin America and EAME, which witnessed declines of 11% and 2%, respectively. Asia Pacific was an outperformer, witnessing growth of 5%. Notably, this marks Asia Pacific’s second consecutive month of positive growth mainly driven by the recovery in China.
The Resource Industries segment’s sales declined 19% in July — the ninth straight month of negative growth. Notably, the segment reported a slump of 21% in June. Sales in EAME went up 25%, which was offset by declines elsewhere. Sales in North America, Latin America and Asia Pacific were down 49%, 21% and 7%, respectively. The segment’s performance in EAME has been showing a gradual improvement in the past three months. The 25% growth in July marks the region’s best performance so far this year
Sales in the Construction Industries segment were down 20%, a meager improvement from a decline of 23% in June. The segment’s sales have been declining for eight straight months. Sales in North America, EAME and Latin America were down 35%, 11% and 5%, respectively. Asia Pacific was the only region to report growth of 10% in sales. The segment has been witnessing a positive trend in Asia Pacific for three straight months.
Sales in the Energy & Transportation segment declined 16%. The segment has been contracting for 10 consecutive months. Sales to Industrial and Transportation sectors plunged 43% and 26%, respectively. Sales to the Oil & Gas sector were down 19%, while the Power Generation sector’s sales increased 8%.
Key Factors Weighing on Caterpillar
The retail sales report follows Caterpillar’s second-quarter 2020 results, which failed to impress investors. Adjusted earnings per share plunged 64% year over year to $1.03 on lower demand across all segments and geographies.
The company refrained from providing any guidance with the second-quarter results. It also stated that its financial results for the remainder of 2020 will bear the impact of the persistent global economic uncertainty due to the COVID-19 pandemic. In the early part of the year, Caterpillar had to suspend operations temporarily at certain facilities on account of supply chain issues, weak demand or as per government mandates to stem the spread of the coronavirus. Though currently all of the company’s primary production facilities are operational, it may have to suspend operations temporarily again if necessary.
The pandemic has dealt a major blow to the manufacturing sector, which was already bearing the brunt of a protracted U.S.-China trade tensions and waning global demand. Per the Institute for Supply Management, the U.S Purchasing Managers’ Index (PMI) came in at 41.5% for April — the lowest since April 2009 when it registered 39.9%. In May, the PMI came in at 43.1%. Notably, a reading below 50 denotes contraction. This indicates that the COVID-19 pandemic and continuing energy market recession has clearly had an impact on the sector.
Per the Institute for Supply Management’s report, the U.S Purchasing Managers’ Index (PMI) came in at 41.5% for April — the lowest since April 2009 when it registered 39.9%. In May, the PMI came in at 43.1%. A reading below 50 denotes contraction. However, the index climbed to 52.6% in June, and came in at 54.2% in July. It remains to be seen whether the recovery in the past two months will sustain considering the surge in coronavirus cases in the United States.
Meanwhile, it has taken initiatives to reduce costs including reducing discretionary expenses, suspending 2020 base salary increases and short-term incentive compensation plans for many employees and all senior executives. Effective Jul 1, the company reinstated 2020 base salary increases for employees except for the most senior executives. These efforts will help sustain margins amid low volumes. The company also remains focused on making continued investment in services and expanded offerings, which are crucial to its strategy for profitable growth.
Price Performance
Shares of Caterpillar have fallen 5.2% so far this year, compared with the industry’s decline of 6%.
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. (SLGN - Free Report) , IIVI Incorporated and SiteOne Landscape Supply, Inc. (SITE - Free Report) . Silgan Holdings and IIVI Incorporated sport a Zacks Rank #1 (Strong Buy), while SiteOne carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Silgan has a projected earnings growth rate of 28.7% for the current year. The company’s shares have gained 22% so far this year.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 38% year to date.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 39% year to date.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Caterpillar (CAT) Reports Retail Sales Decline of 20% in July
Caterpillar Inc.’s (CAT - Free Report) global retail sales declined 20% in the three-month period ended July 2020, highlighting a slight improvement from the slump of 23% in June. The company had last reported a decline of this magnitude in February 2016. Notably, this marks the eighth consecutive month of global retail sales decline for the mining and construction equipment behemoth. The current downside trend can be attributed to overall weak demand primarily on account of the COVID-19 pandemic.
Breakdown of July Performance
North America fared the worst during the month, reporting a plunge of 38%, followed by Latin America and EAME, which witnessed declines of 11% and 2%, respectively. Asia Pacific was an outperformer, witnessing growth of 5%. Notably, this marks Asia Pacific’s second consecutive month of positive growth mainly driven by the recovery in China.
The Resource Industries segment’s sales declined 19% in July — the ninth straight month of negative growth. Notably, the segment reported a slump of 21% in June. Sales in EAME went up 25%, which was offset by declines elsewhere. Sales in North America, Latin America and Asia Pacific were down 49%, 21% and 7%, respectively. The segment’s performance in EAME has been showing a gradual improvement in the past three months. The 25% growth in July marks the region’s best performance so far this year
Sales in the Construction Industries segment were down 20%, a meager improvement from a decline of 23% in June. The segment’s sales have been declining for eight straight months. Sales in North America, EAME and Latin America were down 35%, 11% and 5%, respectively. Asia Pacific was the only region to report growth of 10% in sales. The segment has been witnessing a positive trend in Asia Pacific for three straight months.
Sales in the Energy & Transportation segment declined 16%. The segment has been contracting for 10 consecutive months. Sales to Industrial and Transportation sectors plunged 43% and 26%, respectively. Sales to the Oil & Gas sector were down 19%, while the Power Generation sector’s sales increased 8%.
Key Factors Weighing on Caterpillar
The retail sales report follows Caterpillar’s second-quarter 2020 results, which failed to impress investors. Adjusted earnings per share plunged 64% year over year to $1.03 on lower demand across all segments and geographies.
The company refrained from providing any guidance with the second-quarter results. It also stated that its financial results for the remainder of 2020 will bear the impact of the persistent global economic uncertainty due to the COVID-19 pandemic. In the early part of the year, Caterpillar had to suspend operations temporarily at certain facilities on account of supply chain issues, weak demand or as per government mandates to stem the spread of the coronavirus. Though currently all of the company’s primary production facilities are operational, it may have to suspend operations temporarily again if necessary.
The pandemic has dealt a major blow to the manufacturing sector, which was already bearing the brunt of a protracted U.S.-China trade tensions and waning global demand. Per the Institute for Supply Management, the U.S Purchasing Managers’ Index (PMI) came in at 41.5% for April — the lowest since April 2009 when it registered 39.9%. In May, the PMI came in at 43.1%. Notably, a reading below 50 denotes contraction. This indicates that the COVID-19 pandemic and continuing energy market recession has clearly had an impact on the sector.
Per the Institute for Supply Management’s report, the U.S Purchasing Managers’ Index (PMI) came in at 41.5% for April — the lowest since April 2009 when it registered 39.9%. In May, the PMI came in at 43.1%. A reading below 50 denotes contraction. However, the index climbed to 52.6% in June, and came in at 54.2% in July. It remains to be seen whether the recovery in the past two months will sustain considering the surge in coronavirus cases in the United States.
Meanwhile, it has taken initiatives to reduce costs including reducing discretionary expenses, suspending 2020 base salary increases and short-term incentive compensation plans for many employees and all senior executives. Effective Jul 1, the company reinstated 2020 base salary increases for employees except for the most senior executives. These efforts will help sustain margins amid low volumes. The company also remains focused on making continued investment in services and expanded offerings, which are crucial to its strategy for profitable growth.
Price Performance
Shares of Caterpillar have fallen 5.2% so far this year, compared with the industry’s decline of 6%.
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. (SLGN - Free Report) , IIVI Incorporated and SiteOne Landscape Supply, Inc. (SITE - Free Report) . Silgan Holdings and IIVI Incorporated sport a Zacks Rank #1 (Strong Buy), while SiteOne carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Silgan has a projected earnings growth rate of 28.7% for the current year. The company’s shares have gained 22% so far this year.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 38% year to date.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 39% year to date.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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