Caterpillar, Dow component and world's largest construction and mining equipment maker, is scheduled to report Q3 results tomorrow before the bell.

The Conference call begins Tuesday morning at 11:00am EST.


Analysts expect Q3 EPS of $1.27 on revs of $10.69 bln.
 

Q2 recap:


Reports Q2 (Jun) earnings of $1.49 per share, excluding non-recurring items, $0.23 better than the Capital IQ Consensus of $1.26; revenues rose 9.6% year/year to $11.33 bln vs the $10.96 bln Capital IQ Consensus.

The 10% increase in YoY sales was primarily due to higher sales volume, with the largest increase in Construction Industries mostly due to higher end-user demand for construction equipment.

The company issued upside guidance for FY17, sees EPS of $5.00 vs. $4.32 Capital IQ Consensus Estimate. Meanwhile, they raised its FY17 sales guidance to $42-44 bln vs. $40.74 bln Capital IQ Consensus Estimate, up from $38-41 bln, which was given in April 2017.

TECHS:

The second most heavily shorted in the Dow, CAT is outpacing the DOW with returns of ~35% YTD. Shorts will look for the YoY growth to dwindle and longs will look to continue the burn as the stock recently broke out of a the recent range it created. Below is CAT's absolute and relative returns on a month to month basis. 

RESULTS: Reports Q3 EPS and revenue beats; raises FY17 EPS and revenue guidance above consensus.

Conf Call Notes (Courtesy of Briefing):

  • Co saw broad-based sales increases across a number of industries in all regions
  • Co continues to see strength in China construction
  • Onshore oil and gas in North America is also strong
  • Construction activity in North America was up compared to last year, and co is seeing increased order activity by mining customers
  • The competitive environment in its resources industry segment continued to put pressure on prices
  • Co's profit margins continue to improve in our its three primary segments
  • The improved margins were driven by higher sales volume, price realization, primarily in Construction Industries, and its team's focus on cost discipline
  • Material costs were a slight headwind in Q3, and the co expects this trend to continue
  • However, given this more widespread increase in sales, co raised its full year top line outlook this morning
  • Dealers reduced inventory $700 million in Q3 of last year as compared to a $200 million dealer inventory increase in Q3 this year, a net change of $900 mln
  • While changes to dealer inventory were favorable, it's important to note that dealer inventory in terms of months of sales are low based on historical levels and are lower than at the end of Q2
  • Higher sales volume and favorable price realization were the largest drivers to the increase in profit
  • All four geographic regions saw sales and revenues increases ranging from 20-29% versus a year ago
  • However, keep in mind that, in some cases, this was off a very low base, especially in Latin America
  • Dollar sales increase was highest in North America, primarily due to higher end-user demand for both new equipment and aftermarket parts as well as favorable changes to dealer inventories as dealers in North America held inventory about flat in the quarter versus reducing inventories in Q3 a year ago
  • Asia Pacific saw the second highest increase in dollars sales primarily due to higher end-user demand for construction equipment
  • About half of the increase was in China with strength also broadening to other countries in the region