Caterpillar (CAT) falls 7% on inflation concerns
By Robert Davis
21:30, 28 January 2022
The stock of Caterpillar Inc. (CAT), one of America’s largest heavy machinery manufacturers, fell by 7% to $198.15 on Friday after the company reported its fourth-quarter earnings results before the market opened.
Even though the company beat Wall Street estimates, earnings showed that inflation is taking a toll on the business as supply-chain struggles continue to choke dealer inventories.
Despite inflation and the stock’s dip on Friday, Caterpillar’s stock is up nearly 8% over the last 12 months.
Earnings details
According to Caterpillar’s earnings statement, the company reported fourth-quarter revenue of $13.8bn (£10.31bn) and earnings per share of $2.69 compared to estimates of $11.8bn in revenue and $2.23 earnings per share.
The Deerfield, Illinois-based company’s operating profit margin was 11.7% during the quarter, lower than the 12.3% figure it posted in Q4 2020.
Profit per share was $3.91 compared to $1.42 the company recorded last year.
For the full year, Caterpillar brought in more than $55bn in revenue, representing a 22% increase on an annualised basis.
The increase “reflected higher-end user demand and services” and the impacts from supply chain issues and inflation, Caterpillar said in the release.
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Inflation transparency
Companies have become more transparent about the negative impacts of inflation in their earnings as federal data shows the issue is likely to persist into the future.
One example is Whirlpool, which explicitly addressed inflation seven times in its earnings release.
Marc Bitzer, the company’s chief executive, said the results reflect the company’s ability to “execute in a challenging environment,” something investors need to hear given the recent market correction.
Whirlpool’s stock was up more than 4% to $205.19 on Friday despite falling by more than $4 per share since it released its fourth quarter earnings on Wednesday.
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