Caterpillar reports Second Quarter results, China demand is lower
Sales and revenues up 3%; profit per share slightly up, strong ME&T operating cash flow; returned about $1.9 billion in share repurchases and dividends and full-year profit per share outlook range is maintained at $12.06 to $13.06; the company currently expects to be at the lower end of this range
Caterpillar Inc. has announced their second-quarter 2019 sales and revenues of $14.4 billion, a 3% increase compared with $14.0 billion in the second quarter of 2018. Second-quarter 2019 profit per share was $2.83, compared with $2.82 profit per share in the second quarter of 2018.
During the second quarter of 2019, Machinery, Energy & Transportation (ME&T) operating cash flow was $2.0 billion. The company repurchased $1.4 billion of Caterpillar common stock and paid dividends of $0.5 billion in the second quarter of 2019. The enterprise cash balance at the end of the second quarter of 2019 was $7.4 billion.
“Sales and revenues increased this quarter, including a record performance from Construction Industries, which reflected our strong competitive position globally,” said Caterpillar Chairman and CEO Jim Umpleby. “Our strong operating cash flow in the quarter allowed us to repurchase shares and pay dividends of about $1.9 billion. This is in line with our intention to return substantially all free cash flow to shareholders.”
While the company delivered stronger-than-expected results in April, CFO Andrew Bonfield warned at the time that the company would lose market share in China in construction activity, with “competitive pricing” from other firms impacting Caterpillar’s results.
Caterpillar reiterated this point in its second-quarter release, calling attention to “continued competitive pricing pressures and timing of the selling season as well as unfavorable currency impacts.” Caterpillar’s construction sales in the Asia/Pacific region declined in the quarter “due to lower demand mainly in China,” the company said in a statement.
Caterpillar’s results have also been closely monitored in light of ongoing trade tensions with China, which have raised the specter of tariff-related costs for materials. Caterpillar’s second-quarter report captures the period in May during which President Donald Trump raised the rate of tariffs on $200 billion worth of Chinese goods to 25%, from 10% previously.
2019 Outlook
The full-year profit per share outlook range is maintained at $12.06 to $13.06, which includes the first-quarter $0.31 per share discrete tax benefit. The company currently expects to be at the lower end of this outlook range.
The company continues to expect modest sales growth in 2019, which assumes a recovery in Oil and Gas near the end of the year and dealers working through higher machine inventory levels. The company still expects price realization to offset manufacturing costs. With a higher amount of restructuring costs incurred in the second quarter of 2019, the company expects restructuring costs for the remainder of the year to be significantly lower.
“We expect our profit per share in 2019 to be another record,” added Umpleby. “We have the right strategy in place to deliver long-term profitable growth through our continued focus on strategic investments, including growing services and expanding offerings. We will also continue to focus on driving operational excellence including a flexible and competitive cost structure.”
The outlook does not include a mark-to-market gain or loss for remeasurement of pension and other postemployment benefit plans, which will be excluded from adjusted profit per share in the fourth quarter of 2019 along with any other discrete items.
Click here to download the full version of the Caterpillar Inc. 2Q 2019 results release.
Click here to download the Caterpillar Inc. 2Q 2019 quarterly highlights.
