Caterpillar (CAT) Q1 Earnings Top Estimates On Improving Demand

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Caterpillar Inc. (CAT Quick Quote CAT - Free Report) reported first-quarter 2020 adjusted earnings per share of $2.87, which beat the Zacks Consensus Estimate of $1.93 by a margin of 49%. The bottom line surged 74% from the prior-year quarter as all of its segments reported improved performances courtesy of higher demand in end markets. The company’s shares were up 2.6% in pre-market trading following the upbeat results.

Including one-time items, Caterpillar’s first-quarter earnings per share was $2.77, reflecting a growth of 40% from the prior-year quarter figure of $1.98.

Improving Demand Fuels Revenue Growth

The company’s first-quarter revenues of $11.9 billion surpassed the Zacks Consensus Estimate of $11.05 billion. The top line also indicated an improvement of 12% from the year-ago quarter. This upbeat performance was driven by higher sales volume aided by higher end-user demand and the impact from changes in dealer inventories. Notably, dealers increased their inventories by $700 million during the reported quarter compared to $100 million in the prior-year quarter, which marked the outbreak of the coronavirus pandemic.

Sales in the Asia Pacific impressed with year-over-year growth of 31% followed by Latin America, which witnessed an increase of 24% in sales. Sales in EAME were up 13% while in North America were flat compared with the year-ago quarter.

Caterpillar Inc. Price, Consensus and EPS Surprise

Caterpillar Inc. Price, Consensus and EPS Surprise

Caterpillar Inc. price-consensus-eps-surprise-chart | Caterpillar Inc. Quote

Margins Gain on Higher Sales Volume

In first-quarter 2021, cost of sales increased 10% year over year to $8 billion. Manufacturing costs were higher in the quarter owing to higher short-term incentive compensation expense, which were partially offset by favorable material costs and lower warranty expense. Gross profit rose 15% year over year to $3.87 billion primarily on the back of improved sales. Gross margin was 32.6% in the quarter under review compared with 31.7% in the prior-year quarter.

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