What happened
Caterpillar (CAT -0.68%) delivered an impressive quarter, beating on both earnings and revenue. But the report also suggests momentum is slowing, and the shares are trading down as much as 5% on Thursday as a result.
So what
Investors should have few complaints about the results Caterpillar posted in the first quarter. The company earned $4.91 per share on revenue of $15.86 billion, easily topping analyst expectations for $3.78 per share in earnings on sales of $15.25 billion.
Operating profit margin was 17.2% for the first quarter, up from 13.7% a year prior. Caterpillar also returned about $1 billion to investors in the quarter via dividends and share buybacks and generated operating cash flow of $1.6 billion.
"I'd like to thank our global team for their strong operational performance while serving healthy demand during the first quarter," CEO Jim Umpleby said in a statement. "Our team remains focused on supporting our customers as we execute our strategy for long-term profitable growth."
Now what
Caterpillar sees full-year operating profit margin coming in at the top half of the range it set, and said second-quarter sales should increase "in line with normal seasonality." The question investors have is, How long can the good times last?
Caterpillar is the world leader in heavy equipment used in the construction and mining industries, and the company's sales tend to be cyclical and based on global construction volumes. Investors are concerned that the world economy could be headed toward a slowdown, and there are some worrying signs in Cat's report that things are only going to get harder from here.
Dealer inventories were up, suggesting it is taking a little longer to move product. And Caterpillar's backlog of future business was flat.
Cat shares were up as much as 40% since October heading into earnings season. The results suggest the enthusiasm was justified, but also that the party might soon be over.
