Caterpillar shares slump on sales warning as machinery demand cools
Expect Q2 hit on changes in dealer inventories - CFO
Sales miss estimates as Europe, China weakness weighs
Shares fall 7%
Adds CEO, CFO comments, details on inventories
By Deborah Mary Sophia
April 25 (Reuters) -Caterpillar CAT.N on Thursdaywarned of a sales drop in the current quarter as volumes take a hit from dealers tightening equipment inventories, sparking worries that a months-long boom in machinery demand may be coming to an end.
Shares of the global economy bellwether slumped 7% in morning trade as it said end-user sales of its machines was weaker than planned. The stock had gained about 23% for the year so far as of Wednesday's close and hit a record high earlier in April.
Caterpillar reported weak construction equipment sales in all regions except North America, whereconstruction demand is expected to stay healthy forthe rest of the year thanks to the U.S. government's $1 trillion infrastructure law.
Still, that was not enough to offset a slump in demand in Europe and prolonged weakness in China, where economic uncertainties have weakened construction activity, prompting a cutbackin production of certain machines.
"We've been pretty disciplined about making sure that we have cut production like, for example, in excavators ... where we do see softness in the market," Caterpillar CFO Andrew Bonfield said.
Sales at Caterpillar's construction equipment business, which makes its ubiquitous yellow excavators, fell 5% in the first quarter, while its segment that caters to natural resources industries reported a sales decline of 7%.
"I do think we have to kind of re-evaluate and think through what execution would look like. (Machines sales) came in a bit weaker and that doesn't give me great confidence as we head through the year ... we definitely are walking away with more questions," M Science senior analyst Alex Prudhomme said.
The Texas-based companyforecast roughly flat sales for the year.
Still, Caterpillaris banking on higher prices and flattening manufacturing costs to pad margins in the second quarter. Its first-quarter adjusted profit of $5.60 per share surpassedestimates of $5.14, according to LSEG data.
DEALER INVENTORY CONCERNS GROW
Coming off of a strong 2023 where supply chain concerns and soaring demand prompted dealers to bulk up on heavy equipment, U.S. machinery makers are now seeing a moderation in product stocking at dealers, forcing them to tighten their inventories.
Caterpillar said dealerinventories for machines grew a higher-than-expected$1.1 billion in the quarter due to sales to end-users being "modestly lower" than it had anticipated.
Its order backlog increased just $400 million on a sequential basis, but executives said they were confident that end-market demand would be stable this year.
"Dealer inventory is comfortably within what we consider a typical range, so we are not concerned about it," CEO Jim Umpleby told analysts on a post-earnings call.
Still, with investors zeroing in ondealer inventories, Caterpillar's results dragged shares of its rivals Deere DE.N and CNH Industrial CNHI.N down more than 1% onThursday.
For the first quarter ended March 31, Caterpillar'srevenue fell slightly to $15.80 billion, missing estimates of $16.04 billion.
Reporting by Deborah Sophia in Bengaluru; Editing by Saumyadeb Chakrabarty and Devika Syamnath
Asset collegati
Ultime news
Disclaimer: le entità di XM Group forniscono servizi di sola esecuzione e accesso al nostro servizio di trading online, che permette all'individuo di visualizzare e/o utilizzare i contenuti disponibili sul sito o attraverso di esso; non ha il proposito di modificare o espandere le proprie funzioni, né le modifica o espande. L'accesso e l'utilizzo sono sempre soggetti a: (i) Termini e condizioni; (ii) Avvertenza sui rischi e (iii) Disclaimer completo. Tali contenuti sono perciò forniti a scopo puramente informativo. Nello specifico, ti preghiamo di considerare che i contenuti del nostro servizio di trading online non rappresentano un sollecito né un'offerta ad operare sui mercati finanziari. Il trading su qualsiasi mercato finanziario comporta un notevole livello di rischio per il tuo capitale.
Tutto il materiale pubblicato sul nostro servizio di trading online è unicamente a scopo educativo e informativo, e non contiene (e non dovrebbe essere considerato come contenente) consigli e raccomandazioni di carattere finanziario, di trading o fiscale, né informazioni riguardanti i nostri prezzi di trading, offerte o solleciti riguardanti transazioni che possano coinvolgere strumenti finanziari, oppure promozioni finanziarie da te non richieste.
Tutti i contenuti di terze parti, oltre ai contenuti offerti da XM, siano essi opinioni, news, ricerca, analisi, prezzi, altre informazioni o link a siti di terzi presenti su questo sito, sono forniti "così com'è", e vanno considerati come commenti generali sui mercati; per questo motivo, non possono essere visti come consigli di investimento. Dato che tutti i contenuti sono intesi come ricerche di investimento, devi considerare e accettare che non sono stati preparati né creati seguendo i requisiti normativi pensati per promuovere l'indipendenza delle ricerche di investimento; per questo motivo, questi contenuti devono essere considerati come comunicazioni di marketing in base alle leggi e normative vigenti. Assicurati di avere letto e compreso pienamente la nostra Notifica sulla ricerca di investimento non indipendente e la nostra Informativa sul rischio riguardante le informazioni sopra citate; tali documenti sono consultabili qui.
