Shares of Caterpillar Inc. sank Friday, after the construction and mining equipment company beat second-quarter profit and revenue expectations, but provided some downbeat “color” on its outlook for the current quarter and the rest of the year.
The stock /zigman2/quotes/203434128/composite CAT +0.80% dropped 3.2% in afternoon trading, enough to make it the biggest loser among the Dow Jones Industrial Average’s /zigman2/quotes/210598065/realtime DJIA +1.00% components. The $6.71 price decline was shaving about 43 points off the Dow’s price, while the Dow dropped 146 points, or 0.4%.
The company reported before Friday’s opening bell second-quarter adjusted earnings per share that more than doubled to $2.60 and revenue that rose 29%, to beat the FactSet consensus for EPS of $2.41 and for revenue of $12.51 billion.
The company did not provide financial guidance for the current third quarter or for the year, citing the uncertain operating environment.
“In light of the highly fluid environment, we will continue our practice of not providing profit-per-share guidance,” said Chief Executive Jim Umpleby on the post-earnings conference call with analysts, according to a FactSet transcript. “However, we’ll share some high-level assumptions for the coming quarter and the full year.”
Chief Financial Officer Andrew Bonfield helped provide some “color” to the outlook, that may have helped push the stock into the red. He said third-quarter margins should be above year-ago levels, as strong volume offsets incentive compensation, but he expects margins to “moderate” compared with the sequential second quarter given expectations of “cost headwinds” through the end of the year.
Although price increases were implemented at the end of the second quarter, he indicated that might not be enough to cover inflation.
“Although we did take price actions, we do expect higher manufacturing costs, which means that our gross margin percentage will be moderately lower in the second half of the year versus the first half,” Bonfield said.
Within the company’s energy and transportation business, Bonfield said additional prices increases weren’t implemented, given that many products witnessed different levels of demand, “so this means material and freight costs will be a headwind for that segment.”
Caterpillar’s stock fell has lost 9.8% over the past three months, while the Dow has gained 3.2%. Over the past 12 months, the stock has run up 50.6% while the Dow has advanced 32.8%.