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Caterpillar Inc. (CAT - Free Report) reported second-quarter 2022 adjusted earnings per share of $3.18, which surpassed the Zacks Consensus Estimate of $3.00 by a margin of 6%. This compares to our estimate of $3.18 for the quarter. The bottom-line figure marked a 22% improvement year on year. Strong demand across most of its end markets and favorable price realization led to the improvement in earnings in the quarter under review despite unfavorable manufacturing costs (mainly higher material and freight costs).
Including one-time items, Caterpillar’s earnings per share was $3.13, an improvement from the prior-year quarter’s figure of $2.56.
Revenues Up Aided by All Segments
The company’s second-quarter revenues of $14.25 billion missed the Zacks Consensus Estimate of $14.3 billion. Our estimate for the quarter was $14.6 billion. However, the top line improved 10.5% from the year-ago quarter on favorable price realization and increased sales volumes. Sales volume was primarily driven by services, partially offset by lower sales of equipment to end users. Unfavorable currency impacts related to the euro, Australian dollar and Japanese yen had a dampening effect. Sales increased across all of its three segments.
Caterpillar Inc. Price, Consensus and EPS Surprise
In the quarter under review, cost of sales increased 12.3% year over year to around $10 billion. Manufacturing costs were higher in the quarter due to inflated material costs and freight costs. Gross profit improved 7% year over year to $4.3 billion. Gross margin was 30% in the quarter under review, down from 31.1% in the prior-year quarter.
Selling, general and administrative (SG&A) expenses increased 4.5% year over year to around $1.42 billion. Research and development (R&D) expenses climbed 7.6% to $480 million. Both SG&A and R&D expenses in the quarter were up year over year due to investments associated with the company's strategy for profitable growth.
Operating profit in the quarter rose 8.7% year over year to $1.94 billion. Gains from increased volumes and favorable price realization offset the impact of inflated manufacturing costs as well as higher SG&A and R&D expenses. Adjusted operating margin was 13.6% in the reported quarter, down from 13.9% in the prior-year quarter.
Segment Performances
Machinery and Energy & Transportation (ME&T) sales rose 11% year over year to $13.5 billion in the quarter under review. Construction Industries' sales were up 7% year over year to $6 billion on favorable price realization, somewhat offset by unfavorable currency impacts. Sales volume dipped slightly year on year as lower sales of equipment to end users were mostly offset by higher sales of aftermarket parts. Sales growth in other Latin America and North America helped offset lower sales in EAME and Asia Pacific.
Sales at Resource Industries gained 16% year over year to around $2.96 billion on higher sales volume, backed by higher end-user demand for aftermarket parts and improved price realization. Sales were up in Asia Pacific and North America, which negated year-on-year declines witnessed in EAME and Latin America.
Sales of the Energy & Transportation segment in the quarter were around $5.7 billion, reflecting growth of 15% from the prior-year quarter as sales were up in all applications.
The ME&T segment reported an operating profit of $1,804 million, which reflected an improvement of 9% year over year. The Construction Industries segment witnessed a 4% decline in operating profit to $989 million. Favorable price realization was offset by higher manufacturing costs and lower sales volumes.
The Resource Industries segment’s operating profit improved 2% year over year to $355 million in the second quarter as higher sales volume and favorable price realization offset the impact of higher manufacturing costs. The Energy & Transportation segment’s operating profit slumped 11% year over year to $659 million as increasing manufacturing and SG&A/R&D expenses negated gains from higher sales volumes and price realization.
Financial Products’ total revenues climbed 3% to $798 million from the prior-year quarter. The segment's profits were $217 million in the reported quarter — an 11% drop year on year.
Cash Position
In the first half of 2022, Caterpillar’s operating cash flow was $2.55 billion compared with $4.05 billion in the prior-year comparable period. The company returned $1.7 billion to shareholders through dividends and share repurchases throughout the quarter, ending the quarter with cash and equivalents of $6 billion.
Price Performance
Image Source: Zacks Investment Research
Over the past year, Caterpillar stock has fallen 5%, in line with the industry.
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
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Titan International has an estimated earnings growth rate of 165% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 43%.
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MRC Global has an expected earnings growth rate of 259% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 24% in the past 60 days.
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Caterpillar (CAT) Q2 Earnings Beat Estimates, Increase Y/Y
Caterpillar Inc. (CAT - Free Report) reported second-quarter 2022 adjusted earnings per share of $3.18, which surpassed the Zacks Consensus Estimate of $3.00 by a margin of 6%. This compares to our estimate of $3.18 for the quarter. The bottom-line figure marked a 22% improvement year on year. Strong demand across most of its end markets and favorable price realization led to the improvement in earnings in the quarter under review despite unfavorable manufacturing costs (mainly higher material and freight costs).
Including one-time items, Caterpillar’s earnings per share was $3.13, an improvement from the prior-year quarter’s figure of $2.56.
Revenues Up Aided by All Segments
The company’s second-quarter revenues of $14.25 billion missed the Zacks Consensus Estimate of $14.3 billion. Our estimate for the quarter was $14.6 billion. However, the top line improved 10.5% from the year-ago quarter on favorable price realization and increased sales volumes. Sales volume was primarily driven by services, partially offset by lower sales of equipment to end users. Unfavorable currency impacts related to the euro, Australian dollar and Japanese yen had a dampening effect. Sales increased across all of its three segments.
Caterpillar Inc. Price, Consensus and EPS Surprise
Caterpillar Inc. price-consensus-eps-surprise-chart | Caterpillar Inc. Quote
Inflated Costs Weigh on Margins
In the quarter under review, cost of sales increased 12.3% year over year to around $10 billion. Manufacturing costs were higher in the quarter due to inflated material costs and freight costs. Gross profit improved 7% year over year to $4.3 billion. Gross margin was 30% in the quarter under review, down from 31.1% in the prior-year quarter.
Selling, general and administrative (SG&A) expenses increased 4.5% year over year to around $1.42 billion. Research and development (R&D) expenses climbed 7.6% to $480 million. Both SG&A and R&D expenses in the quarter were up year over year due to investments associated with the company's strategy for profitable growth.
Operating profit in the quarter rose 8.7% year over year to $1.94 billion. Gains from increased volumes and favorable price realization offset the impact of inflated manufacturing costs as well as higher SG&A and R&D expenses. Adjusted operating margin was 13.6% in the reported quarter, down from 13.9% in the prior-year quarter.
Segment Performances
Machinery and Energy & Transportation (ME&T) sales rose 11% year over year to $13.5 billion in the quarter under review. Construction Industries' sales were up 7% year over year to $6 billion on favorable price realization, somewhat offset by unfavorable currency impacts. Sales volume dipped slightly year on year as lower sales of equipment to end users were mostly offset by higher sales of aftermarket parts. Sales growth in other Latin America and North America helped offset lower sales in EAME and Asia Pacific.
Sales at Resource Industries gained 16% year over year to around $2.96 billion on higher sales volume, backed by higher end-user demand for aftermarket parts and improved price realization. Sales were up in Asia Pacific and North America, which negated year-on-year declines witnessed in EAME and Latin America.
Sales of the Energy & Transportation segment in the quarter were around $5.7 billion, reflecting growth of 15% from the prior-year quarter as sales were up in all applications.
The ME&T segment reported an operating profit of $1,804 million, which reflected an improvement of 9% year over year. The Construction Industries segment witnessed a 4% decline in operating profit to $989 million. Favorable price realization was offset by higher manufacturing costs and lower sales volumes.
The Resource Industries segment’s operating profit improved 2% year over year to $355 million in the second quarter as higher sales volume and favorable price realization offset the impact of higher manufacturing costs. The Energy & Transportation segment’s operating profit slumped 11% year over year to $659 million as increasing manufacturing and SG&A/R&D expenses negated gains from higher sales volumes and price realization.
Financial Products’ total revenues climbed 3% to $798 million from the prior-year quarter. The segment's profits were $217 million in the reported quarter — an 11% drop year on year.
Cash Position
In the first half of 2022, Caterpillar’s operating cash flow was $2.55 billion compared with $4.05 billion in the prior-year comparable period. The company returned $1.7 billion to shareholders through dividends and share repurchases throughout the quarter, ending the quarter with cash and equivalents of $6 billion.
Price Performance
Image Source: Zacks Investment Research
Over the past year, Caterpillar stock has fallen 5%, in line with the industry.
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Greif Inc. (GEF - Free Report) , Titan International and MRC Global (MRC - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Greif has an estimated earnings growth rate of 37% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 17%.
Greif pulled off a trailing four-quarter earnings surprise of 22.9%, on average. GEF’s shares have risen 17% in the past year.
Titan International has an estimated earnings growth rate of 165% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 43%.
Titan International pulled off a trailing four-quarter earnings surprise of 56.4%, on average. TWI’s shares have soared 101% in a year.
MRC Global has an expected earnings growth rate of 259% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 24% in the past 60 days.
MRC Global has a trailing four-quarter earnings surprise of 140.8%, on average. MRC’s shares have surged 35% in the past year.