Caterpillar Delivers Blowout Quarter In 1Q

Caterpillar Inc. (CAT) delivered a blowout quarter in 1Q as the manufacturer of mining and construction equipment posted revenues of $11.9 billion, up 12% year-on-year and beating analysts’ estimates of $10.9 billion.

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The company reported adjusted earnings of $2.87 per share in 1Q that blew past consensus estimates of $1.94 per share.

Caterpillar Chairman and CEO Jim Umpleby said, “I’m proud of our global team’s strong performance as they continue to serve our customers. We’re encouraged by improving conditions in our end markets and are proactively managing supply chain risks. Our dedicated team continues to execute our strategy for long-term profitable growth.”

CAT stated that the rise in revenues was driven by higher sales volumes due to rising demand from end-users and from dealers increasing their inventories more during the quarter versus the same period last year.

In the fiscal second quarter, CAT expects sales to improve in the Construction Industries segment, led by North America. The company also anticipates sales growth in the Energy and Transportation business and higher demand by end-users in resource industries like Heavy Construction and Mining. CAT expects operating margin to moderate in 2Q versus the first quarter. (See Caterpillar Inc. stock analysis on TipRanks)

Following the earnings, Oppenheimer analyst Noah Kaye reiterated a Hold on the stock. Kaye commented on the results, “CAT handily beat 1Q21 top/bottom-line consensus with healthy incremental margins as it pointed to improving end-user demand across segments. With dealer inventories increasing +$700M ($500M positive sales impact year/year), CI [construction industries] paced y/y sales growth (sales to end-users +17%), while APAC led growth on a regional basis (dealer stats +27% in 1Q).”

“Management indicated expectations for operating margin improvement to moderate in 2Q, which may reflect broad-based supply chain and material cost inflation trends as an offset to anticipated stronger demand in RI (mining, heavy construction, quarry and aggregates),” Kaye added.

Overall, consensus on the Street is that CAT is a Moderate Buy based on 7 Buys, 6 Holds, and 1 Sell. The average analyst price target of $231.25 implies that shares are almost fairly priced at current levels with approximately 1.7% upside potential over the next 12 months.