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Category: Stock Market and Caterpillar
Date: 2 February 2020 Stock Price: $131.35 We take a look at the 4th quarter earnings report of their 2019 fiscal year of Caterpillar one of the world's leading machinery and equipment manufacturers with their 4th quarter 2019 earnings topping $13.1 billion, but its the group's earnings guidance that has investors worried.
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About Caterpillar
For more than 90 years, Caterpillar Inc. has been making sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets. With 2018 sales and revenues of $54.722 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company principally operates through its three primary segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment.
Overview of Caterpillar's 4th quarter 2019 earnings report
- Total Revenues: $13.144 billion (down from $14.342 billion for the same quarter of the previous year)
- Total Revenues decreased by -8.4% over the last 12 months
- Operating costs: $11.294 billion (down from $12.459 billion for the same quarter of the previous year)
- Operating costs decreased by-9.3% over the last 12 months
- Some margin improvement for Caterpillar with costs declining by more than their revenues
- Net income: $1.089 billion (up from $1.048 billion for the same quarter of the previous year)
- Diluted earnings per share: $1.97 (down from $2.82 for the same quarter of the previous year)
- PE ratio of Caterpillar: 12.2
- Diluted weighted-average shares outstanding: 556,1 million (down from 587.6 million for the same quarter of the previous year)
- Cash and cash equivalents: $8.284 billion
- Cash and cash equivalents per share: $14.89
- Cash and cash equivalents makes up 11.1% of Caterpillar's market capital
- Cash and cash equivalents makes up 8.82% of Caterpillar's total assets
- Accounts receivable: $8.568 billion
- Accounts receivable makes up 10.9% of Caterpillar's total assets
- Inventories: $11.266 billion
- Inventories makes up 14.3% of Caterpillar's total assets
- Stockholders equity of Caterpillar: $14.624 billion
- Stockholders equity per share: $26.29
- So Caterpillar' is trading at 4.99 times its stockholders equity which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- Cash generated from operations for the fiscal year: $6.912 billion
- Cash generated from operations per share for the fiscal year: $12.42
Caterpillar's management commentary on their 4th quarter 2019 earnings report
DEERFIELD, Ill. – Caterpillar Inc. (NYSE: CAT) today announced fourth-quarter and full-year results for 2019. Sales and revenues for the fourth quarter of 2019 were $13.1 billion, an 8% decrease compared with $14.3 billion in the fourth quarter of 2018. Fourth-quarter 2019 profit per share was $1.97, compared with $1.78 profit per share in the fourth quarter of 2018. Adjusted profit per share in the fourth quarter of 2019 was $2.63, compared with fourth quarter 2018 adjusted profit per share of $2.55.
“In the fourth quarter, strong cost control more than offset lower-than-expected end-user demand,” said Jim Umpleby, Caterpillar Chairman and CEO. “Our margin performance reflected our diligent focus on maintaining a flexible and competitive cost structure.”
“In the fourth quarter, strong cost control more than offset lower-than-expected end-user demand,” said Jim Umpleby, Caterpillar Chairman and CEO. “Our margin performance reflected our diligent focus on maintaining a flexible and competitive cost structure.”
2020 Outlook The company expects 2020 profit to be in a range of $8.50 to $10.00 per share. “We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inventories,” said Umpleby. “We have improved our lead times and remain prepared to respond quickly to any positive or negative changes in customer demand. We will continue to invest in services and expanded offerings to advance our strategy for long term profitable growth, while achieving our Investor Day targets.”
Caterpillar (NYSE: CAT) stock price history
The image below, obtained from Google, shows the stock price history of Caterpillar over the last 5 years. And it's been a pretty good time for Caterpillar stockholders. 5 years ago it was trading at $93.20 and its currently trading at around $117.97 a stock. That's a return of 26.57% provided to Caterpillar stockholders over the last 5 years.
The stock of Caterpillar is trading at close to the midpoint between its 52 week high and its 52 week low, which to us is an indication that the short term sentiment and momentum of Caterpillar stock is neutral at this point in time.
The stock of Caterpillar is trading at close to the midpoint between its 52 week high and its 52 week low, which to us is an indication that the short term sentiment and momentum of Caterpillar stock is neutral at this point in time.
Recent coverage of Caterpillar
The extract below discusses the latest on Caterpillar as obtained from TheStreet.com
Caterpillar Inc. (CAT) - Get Report posted stronger-than-expected fourth quarter earnings Friday, but forecast 2020 profits that misses analysts' estimates amid what the equipment maker called "continued global economic uncertainty." Caterpillar said adjusted earnings for the three months ending in December came in at $2.63 per share, up 3.13% from the same period last year and firmly ahead of the Street consensus forecast of $2.37 per share. Group revenues, Caterpillar said, slipped 8.4% to $13.14 billion, falling short of analysts' forecasts of a $13.4 billion tally. Looking into 2020, Caterpillar said its sees adjusted profits in the range of $8.50 to $10.00 per share, a figure that missed the Refinitiv forecast of $10.563 per share.
"We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inventories," said CEO Jim Umpleby. "We have improved our lead times and remain prepared to respond quickly to any positive or negative changes in customer demand. We will continue to invest in services and expanded offerings to advance our strategy for long term profitable growth, while achieving our Investor Day targets."
Read the full article here
Caterpillar Inc. (CAT) - Get Report posted stronger-than-expected fourth quarter earnings Friday, but forecast 2020 profits that misses analysts' estimates amid what the equipment maker called "continued global economic uncertainty." Caterpillar said adjusted earnings for the three months ending in December came in at $2.63 per share, up 3.13% from the same period last year and firmly ahead of the Street consensus forecast of $2.37 per share. Group revenues, Caterpillar said, slipped 8.4% to $13.14 billion, falling short of analysts' forecasts of a $13.4 billion tally. Looking into 2020, Caterpillar said its sees adjusted profits in the range of $8.50 to $10.00 per share, a figure that missed the Refinitiv forecast of $10.563 per share.
"We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inventories," said CEO Jim Umpleby. "We have improved our lead times and remain prepared to respond quickly to any positive or negative changes in customer demand. We will continue to invest in services and expanded offerings to advance our strategy for long term profitable growth, while achieving our Investor Day targets."
Read the full article here
Caterpillar (NYSE: CAT) latest stock valuation
So what is Caterpillar's stock worth based on the release of their latest earnings report and the outlook provided for the rest of Caterpillar's 2019 fiscal year? Based on Caterpillar's latest earnings and their outlook provided our valuation model provides a target (full value) price at $135.50 a Caterpillar stock. We therefore believe that the stock of Caterpillar is close to fully valued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $135.50. Therefore we see a good entry point into Caterpillar stock at $121.90 or below. We expect the stock of Caterpillar to trade in a narrow range around its current price in coming weeks and months.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $135.50. Therefore we see a good entry point into Caterpillar stock at $121.90 or below. We expect the stock of Caterpillar to trade in a narrow range around its current price in coming weeks and months.
Next earnings release of Caterpillar
It is expected that Caterpillar will release their 1st quarter 2020 earnings report in late April 2020