Caterpillar Q3 Earnings: Revenue Falls Short Of Expectations, CEO Anticipates Muted China Demand

Caterpillar Inc. CAT shares are trading lower after the company reported worse-than-expected third-quarter results.

Total sales and revenue for the quarter declined 4% year-over-year to $16.106 billion, missing the consensus of $16.284 billion.

CAT’s adjusted earnings were $5.17 per share, compared to $5.52 a year ago and below the consensus of $5.36.

The sales decrease was mainly due to a $759 million drop in sales volume, driven by lower equipment sales to end users and a smaller increase in dealer inventories compared to the third quarter of 2023.

Operating profit decreased 9% to $3.147 billion, primarily due to a $372 million impact from lower sales volume, partially offset by $104 million in favorable price realization.

Operating profit margin was 19.5%, down 100 bps YoY. Adjusted operating profit margin was 20% for the quarter, compared with 20.8% a year ago.

Enterprise operating cash flow was $3.6 billion, and the company ended the third quarter with $5.6 billion of enterprise cash. CAT deployed $0.8 billion of cash for repurchases of common stock and $0.7 billion of cash for dividends.

Machinery, Energy & Transportation segment revenue declined 4.7% YoY, with Construction Industries down 9%, Resource Industries down 10%, Energy & Transportation up 5%, and Other Segments down 13%.

Outlook: Caterpillar expects fouth-quarter sales and revenues to be slightly lower than prior year, with machine sales to end users declining. Dealer inventory levels are expected to match year-end 2023.

Adjusted operating profit margin for the fourth quarter is anticipated to be lower than the third quarter due to seasonality but modestly higher than the same period in 2023.

Caterpillar CEO said in the conference call that he anticipates demand in China will remain at a relatively low level for the above 10-pound excavator industry; in North America, government-related new infrastructure projects are expected to remain healthy.

Price Action: CAT is trading lower by 2.94% at $376.11 premarket at the last check Wednesday.

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