Caterpillar Shares Down Following Disappointing Quarterly Earnings

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The shares of Caterpillar has plunged earlier today after the company reported earnings that were below expectations.

Low demand in Asia/Pacific region causes a slump

The shares of Caterpillar, NYSE: CAT has plunged by 8.5 percent today after the company reported earnings that were lower than expected. The manufacturer of heavy equipment revealed that a slump in demand from the Asia/Pacific region is the main cause of the abysmal result posted.

The company has subsequently told its dealers across the globe to an expected price increase by 1 percent to 4 percent on machines and engines. This is in a bid to balance higher material costs.

The company posted earnings per share of $2.55 which is lower than $2.99 expected by analysts. The revenue meanwhile was $14.43 billion, which is higher than the $14.33 billion expected. Despite these results, Caterpillar is optimistic that 2019 profit will increase to roughly $11.75 to $12.75 per share. Meanwhile, Wall Street analysts are expected $12.73 per share

Chairman and CEO Jim Umpleby commenting on this stated that “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.”

The company added that unfavorable currency rates are another reason why sales dropped in the last quarter.

In the fourth quarter of 2019, NYSE: CAT dropped by 7.5 percent to reach its lowest level since 2011. The company noted that the cost of production is arising due to tariffs and increase in prices of steel. According to Caterpillar, tariffs have increased material cost by $40 million in the third quarter of 2018.

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