Check out the latest Caterpillar earnings call transcript.
What happened
Shares of industrial stalwart Caterpillar (CAT -7.02%) fell as much as 10% in early trading Monday before recovering (a bit) to close the day down 9.1%.
Caterpillar reported Q4 sales just short of expectations, $14.34 billion versus Wall Street's hoped-for $14.37 billion. Cat's earnings miss, on the other hand, was quite a bit bigger. The mining and equipment maker said it earned only $2.55 per share, pro forma, and $1.78 per share, GAAP.
Wall Street had expected $2.98.
Investors didn't exactly "dig" Caterpillar's earnings miss today. Image source: Getty Images.
So what
If that sounds bad, well, it gets worse.
You see, objectively speaking, Caterpillar's Q4 (and full-year 2018) results weren't at all terrible. Q4 sales grew 11% year over year and full-year sales were up 20%. Profit-wise, granted, Caterpillar didn't earn as much as Wall Street wanted it to. But one year ago, Cat's Q4 2017 profits were negative. Compared to that, Q4 2018's $1.78 per share in GAAP profit looked pretty good -- and full-year profits shot up from $1.26 in 2017 to $10.26 in 2018, an eightfold increase!
Now what
Problem is, that run of amazing earnings growth Cat posted in 2018 appears to be coming to an end. Caterpillar warned that after growing 20% in 2018, sales growth will only be "modest" in 2019 -- basically confirming Wall Street expectations, which has Caterpillar down for just 6.5% growth in the new year.
Earnings-wise, Cat says per-share profits will come in between $11.75 and $12.75 this year -- thus $12.25 at the midpoint. Wall Street, however, is looking for Caterpillar to report $12.64 per share.
Now it looks like Caterpillar will miss that estimate -- just as it missed estimates in Q4. Earnings may grow 19% this year, but if Wall Street is telling investors to expect more, then they're bound to be disappointed -- and sell off Caterpillar stock once again.
