Caterpillar Inc. (CAT) is one of the well known names in the construction and mining machinery industry with a market capitalization of $52 billion. It is also a leading exporter in the U.S. with more than half of its sales being generated outside the United States.
Caterpillar has been grappling with weak demand in the mining industry. However, its incessant efforts to reduce costs and improvement in the construction segment helped to mitigate the effect of lower mining-related sales on its profits in the last few quarters. However, of late, the slump in oil prices pose a threat to its energy and transportation segment that provides engine products and generators to power generation, industrial, oil and gas and transportation applications. It is also a headwind for the construction business in the oil producing regions of the world.
Caterpillar has long been considered a bellwether of national and global economic strength and a main player in global industrialization. Investors have thus been eagerly awaiting the company’s latest earnings report. Let’s have a quick look at the fourth quarter release of this Peoria, Illinois-based construction and mining behemoth.
Upward Estimate Trend & Surprise History
Investors should note that the earnings estimate for Caterpillar for the fourth quarter has been stationary over the past week and month. The Zacks Consensus Estimate has remained static at $1.55 over these periods.
Caterpillar has delivered a flurry of positive earnings surprises. It has beaten the Zacks Consensus Estimate in the trailing 4 quarters with an average beat of around 22.36%. Investors have been eagerly awaiting Caterpillar’s latest earnings report to see whether it makes a clean sweep in 2014 with outperformance in all four quarters.
Earnings Disappoint
Caterpillar raked in earnings of $1.35 per share that fell short of the Zacks Consensus Estimate of $1.55 due to the recent drop in the price of oil and lower prices for copper, coal and iron ore .
Revenues Came Ahead
Caterpillar however managed to beat on revenues. It reported fourth quarter revenues of $14.2 billion, surpassing the Zacks Consensus Estimate of $14.1 billion.
Key Stats/Developments to Note
At the end of the quarter, Caterpillar’s backlog was $17.3 billion, down from $19.7 billion at the end of the third quarter. The decrease was primarily in Energy & Transportation followed by the Resource Industries and Construction Industries.
Caterpillar has lowered its profit expectation for fiscal 2015 citing lower oil prices. The company estimates earnings per share of $4.75 per share (excluding restructuring costs) in fiscal 2015, lower than the $6.38 earned in fiscal 2014. The Zacks Consensus Estimate is currently pegged at $6.69.
Zacks Rank
Currently, Caterpillar has a Zacks Rank #4 (Sell) depicting the muted mining environment and the effect of falling oil prices. However, this could change following Caterpillar’s earnings report which was just released.
Market Reaction
Caterpillar shares were down almost 7.57% in pre-market trading.
Check back later for our full write up on this Caterpillar earnings report later!
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