Caterpillar Sales Jump 20 Percent in Fourth Quarter, but Profit per Share Falls

Excavator booms, adorned with the Caterpillar Inc. "CAT" logo, are displayed at the Milton CAT dealership in Londonderry, New Hampshire, on Feb. 20, 2020. (Charles Krupa/AP Photo)

American construction equipment manufacturer Caterpillar saw strong sales growth in the fourth quarter, but registered lower year-over-year profit per share, reportedly owing to foreign exchange headwinds.

Caterpillar’s fourth-quarter 2022 sales and revenues came in at $16.6 billion, which is a 20 percent increase from the $13.8 billion made in fourth quarter 2021, according to a press release on Jan. 31. Sales remained strong across the company’s three main business segments—resources industries, construction industries, and energy and transportation. Sales of construction equipment like excavators and bulldozers rose by 19 percent, to $6.85 billion, with all markets except Asia seeing higher sales.

Sales of mining equipment rose by 26 percent for the quarter, with sales seeing an increase in every region. In the energy and transportation business, sales rose to $6.82 billion. Rising investments in the oil and gas sector are said to have resulted in higher demand for Caterpillar’s products.

The company had implemented strong pricing policies over the past two years to offset rising manufacturing costs. This is believed to have helped sustain top-line growth, referring to a company’s increase in revenues earned through core business operations.

The company’s fourth-quarter 2022 profit per share came in at $2.79, which is a decline from the $3.91 profit per share during the year-ago period.

According to Caterpillar, the recent fourth quarter’s profit per share included an “unfavorable ME&T [machine, energy and transportation] foreign currency impact in other income (expense)” of $0.41 per share. This expense was related to “balance sheet translation.”

Full-Year Results

For full-year 2022, sales and revenues were at $59.4 billion, up 17 percent from $51 billion in 2021. “The increase reflected favorable price realization and higher sales volume, driven by the impact from changes in dealer inventories, increased services, and higher sales of equipment to end users,” the release said.

Full-year profit came in at $12.64 per share, an increase from $11.83 per share in 2021. Adjusted profit per share also registered an increase. Enterprise operating cash flow for the year was at $7.8 billion. The company paid dividends worth $2.4 billion and repurchased shares valued at $4.2 billion.

“Our global team delivered one of the best years in our nearly 100-year history, including record full-year adjusted profit per share,” said CEO Jim Umpleby.

“Despite supply-chain challenges, the team achieved double-digit top-line growth and generated strong ME&T free cash flow. We remain committed to serving our customers, executing our strategy, and investing for long-term profitable growth.”

Share Price

Shares of Caterpillar fell by 3.52 percent on Jan. 31. Shares have risen by 5.61 percent year to date. In the month of January, shares of the firm saw an increase in short interest—that is, the number of shares that were sold short and are outstanding.

Between Dec. 31, 2022, and Jan. 15, 2023, short interest rose by 5.5 percent. An increase in short interest is a sign that investors have become more bearish on that specific stock. At present, 1.6 percent of Caterpillar’s shares are sold short.

Currently, Caterpillar shares are trading at around $252. As of Jan. 31, the average one-year price target for the company’s shares is around $242, according to data from management consulting company Fintel.

Of the 2,961 institutional owners reporting positions in Caterpillar, 2,899 are long, while only nine are short. Bank of America Securities and Stifel have given a “buy” rating for Caterpillar stock. BlackRock, the world’s largest asset manager, has 36.46 million shares in Caterpillar, owning 7 percent of the company.