Caterpillar, Inc. (NYSE:CAT) stock is down by 3.5% after the company announced that its Q4 earnings missed analyst estimates. Lower demand from China and higher costs impacted the profits in the quarter.
In the fourth quarter, the company posted a profit of $2.79 per share against the Street estimate of $4.02. This is 29% lower as compared to the EPS of $3.91 per share in the fourth quarter of 2021.
The revenues during the quarter increased by 20% to $16.6 billion, beating estimates by $682.9 million. The full year’s revenue increased by 17% to $59.4 billion.
The revenue numbers were driven by higher prices and improved demand for its construction and mining machinery, especially in North America. Mining equipment sales grew by 26%, and construction machinery sales increased by 19% in Q4.
Despite improvements in sales, the company’s profits were hit by higher costs and supply chain disruptions. The manufacturing costs during the quarter increased by $876 million. The company’s operating margin was down to 10.1% from 11.7% in the same quarter a year ago.
Moving forward, the company remains worried about the slowdown in demand from China, which accounts for up to 10% of its sales. Jim Umpleby, the company’s CEO, stated that demand will remain sluggish in 2023 and that he “doesn’t see signs of improvement at this point.”
Is Caterpillar a Good Stock to Buy?
Caterpillar’s stock has a Moderate Buy rating on TipRanks, based on seven Buy recommendations.
The CAT target price is $258.9, which is 2.6% higher than the current price level.
