Industrial machinery manufacturer Caterpillar (NYSE:CAT) said Friday that cost reduction and prioritized spending helped it offset a $1.4 billion decline in dealer inventories during the second quarter and post better-than-expected results.
The Deerfield, Illinois-based equipment maker posted adjusted per-share earnings of $1.03 on revenues of $10 billion. Analysts were expecting revenue of just $9.38 billion for the quarter.
Though better than what analysts were expecting, $10 billion in sales represented a 31% decrease compared with 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 were 84 cents.
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 about $1.4 billion in the three months ended June 30 versus an increase of about $500 million a year earlier.
It’s for that reason that cost-cutting 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.
CAT in April took on a new short-term credit facility of $3.88 billion that expires at the end of 2020, according to a filing at the Securities and Exchange Commission. Many U.S. manufacturers have sought similar short-term credit lines to secure their balance sheets amid the pandemic.
The company’s board voted last month to maintain its quarterly dividend payment of $1.03 per share, payable to shareholders on Aug. 20.
Caterpillar’s stock, a member of the Dow Jones Industrial Average, dropped $3.93, or 2.9%, in early Friday trading to $132.80