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Caterpillar's March Retail Sales Drop Maximum Since 2016
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Caterpillar Inc.’s (CAT - Free Report) global retail sales recorded a decline of 17% in the three-month period ended March 2020 — levels last witnessed in December 2016. This can be attributed to overall weak performance across all regions and segments. This marks the fourth consecutive month that Caterpillar’s global retail sales have been in the negative territory.
March Numbers in Detail
In March, Asia Pacific fared the worst with a decline of 22% followed by North America, which witnessed a fall of 20%. Latin America and EAME were down 7% and 4%, respectively.
The Resource Industries segment’s sales declined 12% in March – the fifth consecutive month of negative growth. Sales in North America and Latin America both plunged 26%. Sales in Asia Pacific and EAME increased 5% and 3%, respectively.
Sales in the Construction Industries segment were down 18%. The segment’s sales have been declining for four straight months. Sales in Latin America improved 5% in March, offset by decline in sales elsewhere. Asia Pacific disappointed with a decline of 28% in sales. North America and EAME fell 18% and 7%, respectively.
Sales in the Energy & Transportation segment declined 12%. The segment has been contracting for six consecutive months. The Power Generation sector was the only bright spot with sales growth of 2%. This was offset by sales decline of 23%, 13% and 11% in the Oil & Gas sector, the Industrial sector and the Transportation sector, respectively.
Notably, the company had previously gone through an unprecedented 51-month long stretch of declining sales spanning December 2012 to February 2017. However, since March 2017, Caterpillar has been reporting positive sales growth, delivering an average retail sales growth of 10.3% in 2017, 23.5% in 2018 and 4.4% in 2019 before slipping in to the negative territory again.
Q1 Results Bear the Brunt of Lower Demand
This disappointing performance comes on the heels of Caterpillar’s first-quarter 2020 results, which failed to impress investors. The mining and construction equipment behemoth reported adjusted earnings per share of $1.60, which missed the Zacks Consensus Estimate of $1.77 by a margin of 12%. The bottom line also plunged 46% from the prior-year quarter on lower demand across all segments and geographies. The company did not provide any guidance for 2020 and cautioned that results for the remainder of the year will bear the impact of the coronavirus pandemic.
Primary Concerns for Caterpillar
The manufacturing sector was already bearing the brunt of a protracted U.S.-China trade tensions and waning global demand. The coronavirus pandemic has dealt a further blow to it. Per the Federal Reserve, industrial production contracted 7.5% in the first quarter of 2020 — the steepest since second-quarter 2009. Manufacturing output also slumped at an annual rate of 7.1% in the first quarter, the sharpest since first-quarter 2009. Meanwhile, per the Institute for Supply Management, the Manufacturing Purchasing Managers’ Index (PMI), after recording 50.9 in January, and 50.1 in February (indicating expansion), contracted again to 49.1% in March. Caterpillar, being a prominent player in the industry is not immune to this trend.
Caterpillar stated that it 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. Currently, approximately 75% of the company’s primary production facilities continue to operate. Some facilities that were temporarily closed have been reopened.
Previously, the company had withdrawn guidance for 2020 due to the uncertainty related to the impact of the pandemic. Other players in the sector like Terex Corporation (TEX - Free Report) , The Manitowoc Company, Inc. (MTW - Free Report) and Deere & Company (DE - Free Report) , among others, also withdrew their guidance.
Caterpillar has not provided any guidance with the first quarter release as well. The company however cautioned that the impacts of the pandemic will likely be more pronounced on the second quarter results and linger until global economic conditions improve. The company added that it may have to suspend operations temporarily at additional facilities if necessary.
Meanwhile, it has taken actions to reduce costs, which include cutting down discretionary expenses, and suspending 2020 base salary increases and short-term incentive compensation plans for many employees and all senior executives. The company remains focused on making continued investment in services and expanded offerings, which are crucial to its strategy for profitable growth.
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's March Retail Sales Drop Maximum Since 2016
Caterpillar Inc.’s (CAT - Free Report) global retail sales recorded a decline of 17% in the three-month period ended March 2020 — levels last witnessed in December 2016. This can be attributed to overall weak performance across all regions and segments. This marks the fourth consecutive month that Caterpillar’s global retail sales have been in the negative territory.
March Numbers in Detail
In March, Asia Pacific fared the worst with a decline of 22% followed by North America, which witnessed a fall of 20%. Latin America and EAME were down 7% and 4%, respectively.
The Resource Industries segment’s sales declined 12% in March – the fifth consecutive month of negative growth. Sales in North America and Latin America both plunged 26%. Sales in Asia Pacific and EAME increased 5% and 3%, respectively.
Sales in the Construction Industries segment were down 18%. The segment’s sales have been declining for four straight months. Sales in Latin America improved 5% in March, offset by decline in sales elsewhere. Asia Pacific disappointed with a decline of 28% in sales. North America and EAME fell 18% and 7%, respectively.
Sales in the Energy & Transportation segment declined 12%. The segment has been contracting for six consecutive months. The Power Generation sector was the only bright spot with sales growth of 2%. This was offset by sales decline of 23%, 13% and 11% in the Oil & Gas sector, the Industrial sector and the Transportation sector, respectively.
Notably, the company had previously gone through an unprecedented 51-month long stretch of declining sales spanning December 2012 to February 2017. However, since March 2017, Caterpillar has been reporting positive sales growth, delivering an average retail sales growth of 10.3% in 2017, 23.5% in 2018 and 4.4% in 2019 before slipping in to the negative territory again.
Q1 Results Bear the Brunt of Lower Demand
This disappointing performance comes on the heels of Caterpillar’s first-quarter 2020 results, which failed to impress investors. The mining and construction equipment behemoth reported adjusted earnings per share of $1.60, which missed the Zacks Consensus Estimate of $1.77 by a margin of 12%. The bottom line also plunged 46% from the prior-year quarter on lower demand across all segments and geographies. The company did not provide any guidance for 2020 and cautioned that results for the remainder of the year will bear the impact of the coronavirus pandemic.
Primary Concerns for Caterpillar
The manufacturing sector was already bearing the brunt of a protracted U.S.-China trade tensions and waning global demand. The coronavirus pandemic has dealt a further blow to it. Per the Federal Reserve, industrial production contracted 7.5% in the first quarter of 2020 — the steepest since second-quarter 2009. Manufacturing output also slumped at an annual rate of 7.1% in the first quarter, the sharpest since first-quarter 2009. Meanwhile, per the Institute for Supply Management, the Manufacturing Purchasing Managers’ Index (PMI), after recording 50.9 in January, and 50.1 in February (indicating expansion), contracted again to 49.1% in March. Caterpillar, being a prominent player in the industry is not immune to this trend.
Caterpillar stated that it 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. Currently, approximately 75% of the company’s primary production facilities continue to operate. Some facilities that were temporarily closed have been reopened.
Previously, the company had withdrawn guidance for 2020 due to the uncertainty related to the impact of the pandemic. Other players in the sector like Terex Corporation (TEX - Free Report) , The Manitowoc Company, Inc. (MTW - Free Report) and Deere & Company (DE - Free Report) , among others, also withdrew their guidance.
Caterpillar has not provided any guidance with the first quarter release as well. The company however cautioned that the impacts of the pandemic will likely be more pronounced on the second quarter results and linger until global economic conditions improve. The company added that it may have to suspend operations temporarily at additional facilities if necessary.
Meanwhile, it has taken actions to reduce costs, which include cutting down discretionary expenses, and suspending 2020 base salary increases and short-term incentive compensation plans for many employees and all senior executives. The company remains focused on making continued investment in services and expanded offerings, which are crucial to its strategy for profitable growth.
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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