Caterpillar Inc. excavators are on display for sale at the Whayne Supply Co. dealership in Louisville, Kentucky, USA on Monday, January 27, 2020.
Luke Sharrett | Bloomberg | fake pictures
Industrial machinery manufacturer Caterpillar said Friday that lower costs and priority spending helped it offset a $ 1.4 billion decrease in dealer inventories during the second quarter and post better-than-expected results.
The Deerfield, Illinois-based equipment maker posted adjusted earnings per share of $ 1.03 in revenue of $ 10 billion. Analysts had expected revenue of only $ 9.38 billion for the quarter, according to the Refinitiv consensus.
Although better than analysts expected, sales of $ 10 billion represented a 31% decrease compared to the $ 14.4 billion the company reported in the second quarter of 2019.
Including losses resulting from the settlement of pension obligations, Caterpillar’s unadjusted EPS in the second was 84 cents.
Shares of Caterpillar, a member of the Dow Jones Industrial Average, rose 2% in premarket trading.
The company said a persistent decline in demand for its equipment as a result of the Covid-19 pandemic caused dealers to cut machinery and engine inventories by about $ 1.4 billion in the three months ended June 30. compared to an increase of approximately $ 500 million a year earlier.
It is for this reason that cost reduction initiatives and spending austerity were so critical to the company’s success in the second quarter, management said in a statement accompanying the financial results.
“We are well positioned for these difficult times due to the successful execution of our strategy,” Caterpillar CEO Jim Umpleby said in a press release. “We focus on employee safety and maintaining a competitive and flexible cost structure while continuing to invest in expanded offerings and services to better serve our customers. We will adjust production as conditions require.”
Analysts have slashed expectations for Caterpillar’s bottom line as the coronavirus continues to impact capital spending and erode dealer demand for the manufacturer’s equipment.
The impact of the coronavirus was fully exhibited in Caterpillar’s financial results and appeared to follow its progress in the second quarter by geographic region.
Construction sales in North America, for example, fell 54% from the previous year as builders postponed projects.
But in Asia and the Pacific, where the spread of the disease appears to be slowing down at a faster rate, construction sales fell just 10% year-over-year, much better than the 31% decline in first-quarter results for Caterpillar. .
In April, the company acquired a new short-term credit line of $ 3.88 billion that matures in late 2020, according to a document filed with the Securities and Exchange Commission. Many American manufacturers have sought similar short-term lines of credit to secure their balance sheets in the midst of the pandemic.
The company’s board voted last month to maintain its quarterly dividend payment of $ 1.03 per share, payable to shareholders on August 20.
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