Caterpillar bullish with strong results

178 Caterpillar reports strong financial performance for sales in the second quarter of 2018. The firm's sales and revenues hit US$14 billion for the period, compared with $11.3 billion in the second quarter of 2017, a 24%. Second-quarter 2018 profit/share of $2.82 was a second-quarter record. Profit/share was $1.35 in the second quarter of 2017. Adjusted profit per share in the second quarter of 2018 was $2.97, compared with second-quarter 2017 adjusted profit/share of $1.49.

During the second quarter of 2018, Machinery, Energy & Transportation (ME&T) operating cash flow was $2.1 billion, and the company repurchased $750 million of Caterpillar common stock. In June 2018, the board of directors approved an increase to the quarterly dividend of 10% to $0.86/share. The second quarter of 2018 ended with an enterprise cash balance of $8.7 billion.

“Caterpillar delivered record second-quarter profit/share,” said Caterpillar CEO Jim Umpleby. “Our team is doing a great job executing our strategy for profitable growth, focusing on operational excellence, expanded offerings and services.”

The company is raising its 2018 profit/share outlook to a range of $10.50 to $11.50. Excluding restructuring costs of about $400 million, the company expects adjusted profit/share to be in a range of $11.00 to $12.00. The prior profit/share outlook range was $9.75 to $10.75, and the adjusted profit/share outlook range was $10.25 to $11.25.

“Based on outstanding results in the first half of the year and continued strength in many of our end markets, Caterpillar is again raising our profit outlook for 2018. We remain focused on operational excellence, cost discipline and investing for long-term profitable growth,” said Umpleby.

The company is seeing sales in most of its markets continue to improve, while order rates are healthy, and the backlog remained solid in the quarter. For operating profit, the company is raising the outlook range primarily due to the continued strength in many end markets. Recently imposed tariffs are expected to impact material costs in the second half of the year by approximately $100 million to $200 million, and the company expects supply chain challenges to continue to pressure freight costs.

In January 2014, the board of directors authorised the repurchase of $10.0 billion of Caterpillar common stock. The current program expires at the end of this year. Under this authorization, the company repurchased $1.25 billion in common stock in the first half of 2018, of which $750 million was repurchased in the second quarter. As of June 30, 2018, $4.2 billion remained on the current authorization. The company currently expects share repurchases during the second half of 2018 to be in a similar range as the first half, but the amount could vary depending upon market conditions and investing priorities. Aligned with the cash deployment strategy, the company plans to be in the market for share repurchases on a fairly consistent basis.

In July 2018, the board of directors authorised the repurchase of up to $10.0 billion of Caterpillar common stock effective January 1, 2019, with no expiration date.