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Caterpillar Q4 results: shares fall 8% on earnings revenue miss

The US stock market falls after Caterpillar has its worse earnings report in a decade.

Caterpillar stock is plummeting after a worse-than-expected fourth quarter (Q4) earnings report. Caterpillar revenue was down after releasing its revenue report and the Dow Jones has also fallen in early-morning trading as a result.

Caterpillar earnings:key figures

Earnings per share (EPS) $2.55
Revenue $14.34 billion
Cash flow $2.5 billion
Energy and transportaion sales $6.287 billion
Resource industry sales $2.979 billion

Caterpillar earnings

Caterpillar earnings per share were $2.55, less than the $2.99 Wall Street expected. Caterpillar revenue was $14.34 billion,smaller in comparison to the $14.33 billion that financial experts predicted. The corporation noted the decline was because of reduced sales in China.

‘Sales in AsiaPacific declined due to lower demand in China, partially offset by higher demand in a few other countries in the region. Unfavorable currency impacts also contributed to the sales decline,’ said Caterpillar.

The drop in Caterpillar earnings has been attributed to the tariffs that US President, Donald Trump, imposed on Chinese imports. The company said that because of the increased taxes, Caterpillar had to pay more for Chinese materials and there were fewer sales in the Asian nation as well. Economist, Gina Gopinath, noted that China’s economic slowdown could impact US stocks.

‘China's growth slowdown could be faster than expected especially if trade tensions continue, and this can trigger abrupt sell-offs in financial and commodity markets,’ said Gopinath.

Chief executive officer, Jim Umpleby, was still optimistic about Caterpillar’s Q4 results. While the revenue missed expectations, he touted the higher earnings per share.

‘In 2018, Caterpillar achieved record profit per share and returned significant levels of capital to shareholders. Our global team remained focused on serving our customers, executing our strategy and investing for future profitable growth,’ said Umpleby.

What do Caterpillar’s Q4 results mean for their prices?

Caterpillar’s Q4 results could mean a reduced share price. The lackluster Caterpillar earnings report has already caused its stock to plummet. The stock price could drop below its current $125.29.

What do Caterpillar’s Q4 results compare to other construction equipment stocks?

Caterpillar’s Q4 earnings mean a worse-than-expected construction equipment stocks like John Deere. John Deere is releasing its earnings report in February, and it could similarly be affected by the US-China trade war that diminished Caterpillar’s profits. Peter Cardillo, chief market economist at Spartan Capital Securities, believes that the lackluster report from Caterpillar could be negative reports for other construction equipment stocks.

‘With Caterpillar blaming China, investors are expecting more companies do the same’, said Cardillo.

What is Caterpillar’s dividend forecast?

Caterpillar’s dividend forecast is high for its earnings per share. The company is predicting $11.75-$12.75 per share. Umpleby also had moderate guidance for the next Caterpillar earnings report.

‘Our outlook assumes a modest sales increase based on the fundamentals of our diverse end markets as well as the macroeconomic and geopolitical environment. We will continue to focus on operational excellence, including cost discipline, while investing in expanded offerings and services to drive long-term profitable growth,’ said Umpleby.

Caterpillar is the first major company to report earnings during a busy week for revenue reports. Caterpillar’s Q4 results could be a sign of trouble for other corporations that are coping with China’s economic slowdown.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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