Caterpillar's 1Q08 Earnings Report Stats:Beat ? --> Yes (reported $1.45/share vs estimates of $1.33/share)Profits --> Up 13% to $922 million (from $816 million)Sales --> Up 18% to $11.8 Billion (from $10.0 Billion)Machine Sales: grew by $724 million...increase of 16%Engine Sales : grew by $363 million...increase of 22%Financial Product Sales: grew by $122 million...
increase of 18%
Manufacturing Costs: grew by $171 million...increase of 2% (about consistent with the pace of inflation)Other Highlights + Guidance:
*
International sales made up 58% of total company sales (compared to 53% last year)
*
International sales grew 30% year over year:
1.)
Asia Pacfic sales grew 37%:
AP Machinery sales: up 35%
AP Engine sales: up 40%
2.)
Europe-Africa-Middle East (EMEA) sales grew 30%:
EMEA Machinery sales: up 27%
EMEA Engine sales: up 33%
3.)
Latin America sales grew 24%:
LA Machinery sales: up 18%
LA Engine sales: up 33%
4.)
U.S. sales grew 4%:
US Machinery sales: up 3%
US Engine sales: up 3%
*The
'currency effect' of the weak U.S. dollar was
neutral for CAT... it accounted for $310 million of the $1.8 Billion increase in yoy revenues (17%)...however it also negatively impacted the company's gross profits by $30 million
*CAT's Director of Investor Relations,
Mike Dewalt, on the
current U.S. sales environment: "In terms of sales and revenues, we see North America, particularly the United States, weakening even more than we expected just three months ago.
We lowered our full year GDP expectation of the U.S. to half a percent. That’s down from our prior forecast of 1%. In our business, we are seeing weaker dealer sales to end users, and we are lowering our full year estimates for North America sales and revenues. We’ve moved North America from an expectation of being flat to up 5% from 2007 to being in a range of down two to up two...
we do see a weakening picture in North America, Western Europe, and in Japan, and that is included in our full year outlook...I think our view of
construction overall continues to weaken. If you look at the dealer retail sales for the first couple of months of the year and actually what’s going to be posted up here a little bit for March, they continued to weaken. We see our sales to
housing a bit weaker than we thought. We see sales to
non-residential a bit weaker than we thought. I don’t know that it’s significantly inconsistent with our overall view. It’s not a dramatic decline from where we’ve been, but modestly lower."
*Regarding EMEA region sales, CAT expects the slowdown in Western Europe (currently making up about 1/2 of EMEA's total sales) to be neutralized by growth in Central Europe, the Middle East and Africa. Per Mike Dewalt: "...most of the growth or much of the growth in EMEA has been driven by CIS, Africa, and the Middle East. The point is to your question, we are supply constrained in the region for essentially all of our core and large equipment. So to the extent that Western Europe now is going to be slower than we expect this year, that supply will go more to the Middle East, Africa and the Eastern Europe CIS region. We don’t expect any significant change in the total. I mean it’s shifting within the region, but within EMEA the total that we will supply is going to be about the same as we currently see the outlook."
*
CAT's CEO, Jim Owens, on timing of a U.S Recovery.: "Yes,
North America is down; it’s down very sharply. At the retail level kind of peak the trough it’s probably off on the order of 44% already kind of on a sliding basis since it peaked in ’06. But we would see the United States sort of be coming back. Housing’s going to overcorrect on the downside. As we move out into ’09 and ’10 and with the economic stimulus, both fiscal monetary policy, and stabilization of credit markets, I would think the United States, as long as we don’t do anything silly on the policy side and we keep ourselves open and engaged in trading in the world market,
I think we’ll see a nice economic recovery in the United States out there in the ‘09/’10 timeframe...We never had the bubble in non-residential construction that we had in housing and certainly most of the country there’s not a big overbuild or excess capacity. But it is tailing off and it has been. It went off faster than we thought in ’07 and it’s steadily tailed off and I think the current credit market conditions in the U.S. are taking it down further in line with the recessionary expectations that we have for the U.S. economy this year."
*
CAT's 2008 Oil + Commodity Outlook: "The West Texas Intermediate
OIL price should average more than $95 per barrel, and that should continue to encourage increased drilling activity and pipeline construction...Spot thermal
COAL prices should average more than 70 percent higher than last year, and annual contract prices should more than double. The first annual contract for coking coal tripled prices, effective April 1, 2008. Demand remains strong, and supply and transport difficulties are expected to continue...
BASE METALS inventories are extremely low, and demand in the developing economies remains strong. We expect most metals prices to remain very attractive for new investment this year."
*CAT's
Mike Dewalt on
COAL: "...mining is doing quite well, particularly in coal.
Coal prices are up substantially from last year and U.S. exports of coal are rising. This is an industry that’s doing pretty well."
*
CAT's WW GDP growth assumption for 2008 is less than 3%...the slowest growth rate since 2003
*
CAT's 2008 full year Company Outlook - Sales to increase in between 5-10% + Profits to increase in between 5-15% (
given their pace of International growth, sounds like their sandbagging full year guidance)
Full Disclosure: I own shares of
CAT.
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