Caterpillar Inc. (NYSE: CAT) stock fell over 8.2% on January 28th, 2019 (as of 10:05 am GMT-5 ; Source: Google finance) after the company missed the earnings estimates for the fourth quarter of FY 18 and full-year 2019 outlook fell short of analysts’ estimates. The company has reported the net profit of $1.048 billion after a loss of $1.299 billion in the year-earlier quarter.
CAT in the fourth quarter of FY 18 has reported the adjusted earnings per share of $2.55, beating the analysts’ estimates for the adjusted earnings per share of $2.99, according to analysts polled by Refinitiv. The company had reported the adjusted revenue growth of 11 percent to $14.34 billion in the fourth quarter of FY 18, which is in line with the analysts’ estimates for revenue of $14.3 billion. The increase in revenues was primarily due to a $23 million favorable impact from higher average financing rates and a $22 million favorable impact from higher average earning assets. In the fourth quarter, CAT’s revenue increased across all of its regional businesses, with the largest increase in North America, its biggest market by value. But sales in the construction business in Asia-Pacific declined due to lower demand in China. The International Monetary Fund last week had cut its global growth outlook for the second time in three months while China confirmed that growth last year was the slowest in 28 years, as a bruising trade war with the United States hit manufacturers. During the fourth quarter of 2018, retail new business volume was $3.10 billion, which declined 9 percent, from the fourth quarter of 2017. The decrease was primarily driven by lower volume in Cat Power Finance.
Moreover, profit before income taxes fell to $46 million for the fourth quarter of 2018, compared with $133 million for the fourth quarter of 2017. The decline was primarily due to an $86 million increase in provision for credit losses, which was driven by a higher allowance rate and an increase in write-offs, due to continued weakening in the Cat Power Finance portfolio. The provision for income taxes rose to an effective tax rate of 48 percent in the fourth quarter of 2018, compared with negative 107 percent in the fourth quarter of 2017. The rise in the effective tax rate is primarily due to the overall impact of U.S. tax reform in 2017, along with changes in the geographic mix of profits.
The company forecast 2019 adjusted profit of US$11.75 to US$12.75 per share, compared with analysts’ average estimate of US$12.73, according to IBES data from Refinitiv.