Caterpillar shares drop after company cuts forecast again, earnings badly miss the Street - CNBC

Shares of Caterpillar plunged in early trading on Wednesday after the company slashed its full-year outlook and posted disappointing third-quarter earnings.

The company blamed the dismal results on a reduction in inventories from dealers. Executives said in a press release this weakness could persist due to "global economic uncertainty." 

The heavy machinery manufacturer earned $2.66 per share in the third quarter, versus the consensus estimate of $2.88 per share, according to Refinitiv. Revenue came in at $12.758 billion, while Wall Street expected revenue of $13.572 billion. 

The company also lowered its full-year earnings per share forecast to a range of $10.59 and $11.09 from $12.06 and $13.06 a share. Analysts expected an outlook of $11.70 per share. The company said it now expects fourth-quarter demand to be flat.

The Deerfield, Illinois-based company said dealers decreased inventories by about $400 million in the third quarter, compared to increasing inventories by $800 million in the same period last year. 

Shares of Caterpillar fell as much as 6.5% in premarket trading on Wednesday but are currently trading flat. 

"Our volumes declined as dealers reduced their inventories, and end-user demand, while positive, was lower than our expectations," said Caterpillar Chairman and CEO Jim Umpleby. 

Caterpillar's sales in Asia-Pacific declined in the third quarter mainly because of the lower demand in China, the company said.

"Realistically this is what you wanted to see, you wanted to see them take fast action," said Rob Wertheimer, founding partner at Melius Research. "The worst thing you could have....is if you get too far behind the curve on stocking up and then you have to cut later."

"The trade war lead people to bring in inventory, buy a bit little extra, who knows whats going on lets make sure we stock up ahead of tariffs, and that's coming back out of the economy right now," said Wetheimer. 

Shares of the trade bellwether are underperforming the broader market this year as as global trade tensions continue to weigh. The stock is up 5% since January, compared to the S&P 500, which is up nearly 20%. 

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https://www.cnbc.com/2019/10/23/caterpillar-earnings-2point66-a-share-vs-2point88-eps-expected.html

2019-10-23 11:45:01Z
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