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Caterpillar (CAT) Q3 Earnings Beat Estimates, Sales Up Y/Y
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Caterpillar Inc. (CAT - Free Report) reported third-quarter 2021 adjusted earnings per share of $2.66, which beat the Zacks Consensus Estimate of $2.26 by a margin of 18%. The bottom line improved 75% from the prior-year quarter as all of its segments reported improved performances driven by higher demand in end markets and across all geographies, which helped counter inflated input costs. A strong operational performance and a lower-than-expected effective tax rate contributed to the improvement in earnings. Backed by this upbeat performance, Caterpillar’s shares gained 2.5% in the pre-market trading.
Including one-time items, Caterpillar’s earnings per share was $2.60, reflecting a whopping improvement of 113% from the prior-year quarter figure of $1.22.
High Demand in All Markets Drives Revenues
The company’s third-quarter revenues of $12.4 billion missed the Zacks Consensus Estimate of $12.6 billion. However, the top line improved 25% from the year-ago quarter.
This upbeat performance was driven by increasing sales volume, courtesy of higher end-user demand for equipment and services, favorable price realization, and the impact of change in dealer inventories. Dealers lowered their inventories by $600 million during the reported quarter compared to a decrease of $300 million in the prior-year quarter.
Caterpillar Inc. Price, Consensus and EPS Surprise
Sales in Latin America impressed with year-over-year growth of 72% followed by North America, which witnessed an increase of 28% in sales. Sales in EAME were up 23%, while the same in Asia/Pacific rose 8%.
High Sales Offset Costs Aiding Margins
In the quarter under review, cost of sales increased 24% year over year to $8.6 billion. Manufacturing costs were higher in the quarter due to inflated material costs, higher labor related costs and freight costs. Gross profit improved 28% year over year to $3.78 billion, primarily on the back of improved sales, which negated the impact of higher costs. Gross margin was 30.5% in the quarter under review compared with 30.0% in the prior-year quarter.
Selling, general and administrative (SG&A) expenses increased 19% year over year to around $1.34 billion. Research and development (R&D) expenses surged 24% to $427 million. Both SG&A and R&D expenses in the quarter were up year over year due to higher short-term incentive compensation expense, which was reinstated this year. Investments associated with the company's strategy for profitable growth, including acquisition-related expenses also pushed expenses higher.
Adjusted operating profit in the quarter surged 55% year over year to $1.7 billion. Increased volumes and favorable price realization were instrumental in driving the improved performance. These gains were partially negated by higher SG&A and R&D expenses, and inflated manufacturing costs. Adjusted operating margin was 13.7% in the reported quarter, up 260 basis points from the prior-year quarter.
Segment Performances Backed by Improved Demand
Machinery and Energy & Transportation (ME&T) sales rose 27% year over year to $11.7 billion in the quarter under review. Construction Industries sales were up 30% year over year to $5.2 billion owing to increased sales volumes reflecting improving end-user demand, the impact from changes in dealer inventories and favorable price realization.
Sales at Resource Industries surged 32% year over year to around $2.4 billion on higher sales volume backed by higher end-user demand for equipment and aftermarket parts, and changes in dealer inventories. The segment witnessed increased demand in heavy construction and quarry and aggregates as well as mining.
Sales of the Energy & Transportation segment in the quarter were around $5 billion, reflecting growth of 22% from the prior-year quarter. Sales were up in all applications, barring Power Generation that witnessed a 2% dip due to the timing of turbines and turbine-related services.
The ME&T segment reported operating profit of $1,571 million, which highlighted an improvement of 70% year over year. The Construction Industries segment witnessed a 47% surge in operating profit to $859 million, courtesy of higher volume, which offset higher manufacturing costs and SG&A, R&D expenses.
The Resource Industries segment’s operating profit soared 78% year over year to $297 million in the quarter under review as higher sales volume partially offset inflated manufacturing costs. The Energy & Transportation segment’s operating profit surged 41% year over year to $696 million as benefits from higher sales volume were partly negated by increasing manufacturing and SG&A/R&D expenses.
Financial Products’ revenues climbed 5% to $762 million from the prior-year quarter. Financial Products' profits were $173 million in the reported quarter — an improvement of 22% year over year.
Strong Cash Position
In the nine-month period ended Sep 30, 2021, operating cash flow was $5.8 billion compared with $4.2 billion in the prior-year comparable period. The company returned $1.4 billion to shareholders through dividends and share repurchases in the third quarter. Caterpillar ended the quarter with cash and equivalents of $9.4 billion, slightly up from $9.3 billion as of 2020 end.
Price Performance
Image Source: Zacks Investment Research
Over the past year, Caterpillar stock has gained 29.7%, compared with the industry’s rally of 33.9%.
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
Image: Bigstock
Caterpillar (CAT) Q3 Earnings Beat Estimates, Sales Up Y/Y
Caterpillar Inc. (CAT - Free Report) reported third-quarter 2021 adjusted earnings per share of $2.66, which beat the Zacks Consensus Estimate of $2.26 by a margin of 18%. The bottom line improved 75% from the prior-year quarter as all of its segments reported improved performances driven by higher demand in end markets and across all geographies, which helped counter inflated input costs. A strong operational performance and a lower-than-expected effective tax rate contributed to the improvement in earnings. Backed by this upbeat performance, Caterpillar’s shares gained 2.5% in the pre-market trading.
Including one-time items, Caterpillar’s earnings per share was $2.60, reflecting a whopping improvement of 113% from the prior-year quarter figure of $1.22.
High Demand in All Markets Drives Revenues
The company’s third-quarter revenues of $12.4 billion missed the Zacks Consensus Estimate of $12.6 billion. However, the top line improved 25% from the year-ago quarter.
This upbeat performance was driven by increasing sales volume, courtesy of higher end-user demand for equipment and services, favorable price realization, and the impact of change in dealer inventories. Dealers lowered their inventories by $600 million during the reported quarter compared to a decrease of $300 million in the prior-year quarter.
Caterpillar Inc. Price, Consensus and EPS Surprise
Caterpillar Inc. price-consensus-eps-surprise-chart | Caterpillar Inc. Quote
Sales in Latin America impressed with year-over-year growth of 72% followed by North America, which witnessed an increase of 28% in sales. Sales in EAME were up 23%, while the same in Asia/Pacific rose 8%.
High Sales Offset Costs Aiding Margins
In the quarter under review, cost of sales increased 24% year over year to $8.6 billion. Manufacturing costs were higher in the quarter due to inflated material costs, higher labor related costs and freight costs. Gross profit improved 28% year over year to $3.78 billion, primarily on the back of improved sales, which negated the impact of higher costs. Gross margin was 30.5% in the quarter under review compared with 30.0% in the prior-year quarter.
Selling, general and administrative (SG&A) expenses increased 19% year over year to around $1.34 billion. Research and development (R&D) expenses surged 24% to $427 million. Both SG&A and R&D expenses in the quarter were up year over year due to higher short-term incentive compensation expense, which was reinstated this year. Investments associated with the company's strategy for profitable growth, including acquisition-related expenses also pushed expenses higher.
Adjusted operating profit in the quarter surged 55% year over year to $1.7 billion. Increased volumes and favorable price realization were instrumental in driving the improved performance. These gains were partially negated by higher SG&A and R&D expenses, and inflated manufacturing costs. Adjusted operating margin was 13.7% in the reported quarter, up 260 basis points from the prior-year quarter.
Segment Performances Backed by Improved Demand
Machinery and Energy & Transportation (ME&T) sales rose 27% year over year to $11.7 billion in the quarter under review. Construction Industries sales were up 30% year over year to $5.2 billion owing to increased sales volumes reflecting improving end-user demand, the impact from changes in dealer inventories and favorable price realization.
Sales at Resource Industries surged 32% year over year to around $2.4 billion on higher sales volume backed by higher end-user demand for equipment and aftermarket parts, and changes in dealer inventories. The segment witnessed increased demand in heavy construction and quarry and aggregates as well as mining.
Sales of the Energy & Transportation segment in the quarter were around $5 billion, reflecting growth of 22% from the prior-year quarter. Sales were up in all applications, barring Power Generation that witnessed a 2% dip due to the timing of turbines and turbine-related services.
The ME&T segment reported operating profit of $1,571 million, which highlighted an improvement of 70% year over year. The Construction Industries segment witnessed a 47% surge in operating profit to $859 million, courtesy of higher volume, which offset higher manufacturing costs and SG&A, R&D expenses.
The Resource Industries segment’s operating profit soared 78% year over year to $297 million in the quarter under review as higher sales volume partially offset inflated manufacturing costs. The Energy & Transportation segment’s operating profit surged 41% year over year to $696 million as benefits from higher sales volume were partly negated by increasing manufacturing and SG&A/R&D expenses.
Financial Products’ revenues climbed 5% to $762 million from the prior-year quarter. Financial Products' profits were $173 million in the reported quarter — an improvement of 22% year over year.
Strong Cash Position
In the nine-month period ended Sep 30, 2021, operating cash flow was $5.8 billion compared with $4.2 billion in the prior-year comparable period. The company returned $1.4 billion to shareholders through dividends and share repurchases in the third quarter. Caterpillar ended the quarter with cash and equivalents of $9.4 billion, slightly up from $9.3 billion as of 2020 end.
Price Performance
Over the past year, Caterpillar stock has gained 29.7%, compared with the industry’s rally of 33.9%.
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include The Manitowoc Company, Inc. (MTW - Free Report) , Nordson Corporation (NDSN - Free Report) and DXP Enterprises, Inc. (DXPE - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Manitowoc has an anticipated earnings growth rate of 340% for fiscal 2021. The company’s shares have surged around 164% in a year.
Nordson has an estimated earnings growth rate of 45% for the ongoing fiscal year. The company’s shares have gained 30% in the past year.
DXP Enterprises has a projected earnings growth rate of 78% for the current year. The stock has appreciated around 104% in a year’s time.