Industrials
Do Caterpillar Earnings Signal a Value Opportunity or a Value Trap?
Published:
Caterpillar Inc. (NYSE: CAT) reported third-quarter 2020 results before markets opened Tuesday. The heavy equipment maker posted diluted earnings per share (EPS) of $1.22 on revenues of $9.9 billion. In the same period a year ago, the company reported adjusted EPS of $2.66 on revenues of $12.8 billion. Third-quarter results also compare to consensus estimates for EPS of $1.12 and $9.8 billion in revenues.
Operating cash flow totaled $4.3 billion in the quarter, down from $4.5 billion a year ago, and the company boosted its overall cash position to just over $1 billion during the quarter to close with $9.3 billion in cash, short-term investments and restricted cash.
Cat’s operating profit margin fell from 15.8% in the same quarter last year to 10% and sales fell by 23%. Sales in the company’s construction industries dipped by 23% to $1.2 billion, in the resource industries segment by 21% to $494 million, and by 24% in the energy and transportation segment by 24% to $1.3 billion.
Sales fell in all the company’s geographical segments as well. Overall, North American sales fell 31% in the machinery business, by 37% in Latin America, by 14% in Europe/Asia/Middle East and 8% in Asia/Pacific.
Chairperson and CEO Jim Umpleby commented: “Our third-quarter results largely aligned with our expectations, and we’re encouraged by positive signs in certain industries and geographies. We’re executing our strategy and are ready to respond quickly to changing market conditions.”
Caterpillar did not provide guidance, but the consensus estimates for the fourth quarter call for $1.45 in EPS and sales of $11.2 billion. For the full year, analysts are looking for EPS of $5.22 and sales of $41.6 billion.
Shares traded down about 2.3% in Tuesday’s premarket session at $159.55, after losing 3.2% on Monday. The stock’s 52-week range is $87.50 to $171.26, and the consensus 12-month price target is $150.18.
Cat pays a dividend yield of 2.52%, and shares trade at a multiple of more than 22 times expected 2021 earnings. With shares trading above the price target, investors have to decide if that means the stock is undervalued or a value trap. So far Tuesday, they’re choosing the latter.
Want to Retire Early? Start Here (Sponsor)
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
