Caterpillar Inc. (NYSE: CAT) reported mixed quarterly earnings earlier this month, earlier information about this appeared on the Invest Stage. However, the company posted solid growth in both revenue and earnings per share.
The stock is also trading slightly below its GF value. Combined with a solid dividend that has been growing for nearly three decades, the overall potential return could be reduced to a double-digit low in my opinion.
Let’s look at the company and its last quarter to see why I’m bullish on Caterpillar.
Income, and basic information on them
On August 2, Caterpillar announced its second quarter results. Revenue increased 10.5% year-over-year to $14.25 billion, but $136 million less than Wall Street analysts had expected. Adjusted earnings per share were $3.18 from $2.60 in the prior quarter, up 16 cents from estimates.
Across segments, Construction Industries sales rose 7% to $6 billion. Higher operating costs lowered earnings by 4% and segment profitability fell 180 basis points to 16.4%.
Resource Industries rose 16% to $3 billion on earnings of $355 million, but inflationary pressures cut earnings by 170 basis points to 12%.
Energy and transport rose 15% to $5.7 billion. Earnings fell nearly 11% as profit margins fell 320 basis points to 11.6% as higher production costs and costs weighed on results.
Adjusted for restructuring costs, operating margins fell 30 basis points to 13.6%, but Caterpillar’s operating profit increased 5.6% to $1.9 billion.
Return on equity to shareholders for the quarter was $1.7 billion, with share buybacks of $1.1 billion. In mid-July, Caterpillar announced an 8.1% dividend increase, extending the company’s dividend growth streak to 28 consecutive years.
Caterpillar provided guidance for the remainder of the year, and management now expects third-quarter sales to pick up on stronger demand and better prices. The company estimates that prices will be more than enough to outweigh the entry costs. According to Yahoo Finance, analysts expect Caterpillar to earn $12.53 per share in 2022, up 14% year-over-year and set a new record for the company.