Fly Intel: What to watch in Caterpillar earnings report - InvestingChannel

Fly Intel: What to watch in Caterpillar earnings report

Caterpillar (CAT) is scheduled to report results of its second quarter before the market opens on Friday, July 31, with a conference call scheduled for 8:30 am ET. What to watch for: 1. GUIDANCE: On March 26, Caterpillar withdrew its FY20 outlook, which it originally provided on January 31, due to uncertainty caused by the COVID-19 pandemic. When Caterpillar reported its Q1 results on April 28, the company said that it expects Q2 to be more significantly impacted by COVID-19 than Q1. The company noted in its Q1 earnings presentation slides that it expects a decline in dealer inventories at the higher end of the prior $1B-$1.5B range for 2020. 2. COVID-19 IMPACT: During its Q1 earnings conference call, Caterpillar announced that it was temporarily suspending its share repurchase program. Management also said the pandemic impact has been more severe and chaotic than envisioned. Management noted the company expected April to be a “challenging month.” 3. CAT FINANCIAL Q1 RESULTS: On April 28, Cat Financial reported Q1 revenues of $695M, an increase of $41M, or 6% year over year. Q1 profit before income taxes was $127M, a $15M, or 11%, decrease from Q1 of 2019. The decrease was primarily due to a $12M unfavorable impact from lower average earning assets, an $8M increase in provision for credit losses and the $5M unfavorable impact mentioned above from the termination of a committed credit facility with Caterpillar. These unfavorable impacts were partially offset by a $16M decrease in general, operating and administrative expenses primarily due to lower short-term incentive compensation expense. 4. CATERPILLAR MAINTAINS DIVIDEND: On June 10, Caterpillar announced that its board voted to maintain the quarterly cash dividend of $1.03 per share of common stock, payable on August 20 to shareholders of record at the close of business on July 20, the company announced. The company said Caterpillar ended the first quarter of 2020 with $7.1B in enterprise cash and had $20.5B in available liquidity as of April 2020. “Caterpillar is committed to delivering higher free cash flow through the cycles and to returning substantially all of its free cash flow to shareholders. However, given the economic uncertainty associated with the COVID-19 pandemic, the board has postponed any decision on a dividend increase until later this year,” Caterpillar added. 5. MAY-END RETAIL MACHINES SALES: On June 12, Caterpillar reported in a regulatory filing that its total retail machines sales were down 23% on a three month rolling basis in May. For reference, retail sales of machines were down 22% in the period ending in April and down 17% in the period ending in March. The company reported world Resources Industries sales were down 21% in the May-end period, better than the April-end period decrease of 24%. Construction Industries world sales were down 23% in the May-end period, versus down 21% in the prior three-month period ending in April. Total Energy & Transportation Retail Sales were down 17% in the May-end period, and were down 19% in the April-end period.