shares are down after the machinery maker reported strong sales and earnings on Friday morning. Unfortunately, inflation is emerging.
Caterpillar (CAT) reported profit of $ 2.60, beating estimates by $ 2.41, on revenue of $ 12.9 billion, ahead of forecast of $ 12.5 billion.
Caterpillar stock was down 3.1% to $ 206.02 at 9:36 am in pre-market trading. It’s been a good quarter, but rising costs seem to be hitting the stock.
Caterpillar management said in the press release that third quarter profit margins would be “moderate” compared to the second quarter. In addition, operating profit margins for the company’s construction and mining divisions slipped from the first quarter to the second quarter, from 17.8% to 16.8%. Higher material costs, as well as higher R&D costs, hurt the bottom line.
Rising commodity prices have been a problem for all manufacturers. Steel prices, for example, averaged over $ 1,500 per tonne in the second quarter, compared to around $ 1,200 per tonne in the first quarter of 2021 and around $ 500 per tonne in the second quarter of 2020. Until now, in the third quarter, steel prices are averaging about $ 1,800 per tonne. The problem of rising costs does not go away.
At least demand is not a problem. Sales in the construction and mining sectors increased by more than 40% year over year. Sales in both divisions increased sequentially from the first quarter to $ 8.2 billion $ 7.8 billion.
Caterpillar shares have fallen 8.5% in the past three months and are up 17% so far this year. the
gained 5.8% in the last three months and 18% in 2020, while the
Dow Jones Industrial Average
has increased 3.7% in the last three months and 15% this year.
Shares are down about 14% from their June 52-week high of nearly $ 247.
Caterpillar management will host a conference call at 8:30 am. Investors and analysts will be interested in the outlook for commodity inflation.
Write to Al Root at [email protected]