Caterpillar (CAT) Q2 2012 earnings summary

Executive summary

• Q2 sales and revenues reached a record $17.374B, up 22% YoY; excluding acquisitions, they rose 12%. Profit was a record $1.699B and diluted EPS a record $2.54, both up 67%.

• H1 sales and revenues rose 23% to $33.355B; profit increased to $3.285B and diluted EPS to $4.90 from $3.36.

• Higher volume and price realization drove growth, with acquisitions—primarily Bucyrus—also contributing substantially.

Financial highlights

• Q2 operating profit rose to $2.616B from $1.601B; sales growth included $1.527B from volume, $499M from price realization and $1.372B from acquisitions, offset by $249M in currency impacts.

• Q2 incremental operating profit rate was 32%; excluding Bucyrus and MWM it was ~44%, or ~39% excluding those acquisitions and currency impacts.

• H1 operating profit increased 44% to $4.939B; volume and $805M in price realization were partly offset by higher manufacturing, SG&A and R&D costs.

• Material costs were flat in Q2; period costs rose at less than half the rate of sales. H1 price realization was 2.5%-3%, and full-year pricing was expected near 2%.

Outlook and guidance

• FY12 sales and revenues guidance narrowed to $68B-$70B from $68B-$72B; EPS guidance rose to ~$9.60 from ~$9.50 at the prior sales midpoint.

• Stronger U.S. dollar translation reduced the revenue outlook by ~$1B; guidance included a 30.5% estimated annual tax rate.

• FY12 capital expenditures were expected to approach $4B; no material improvement in China sales was assumed, with Q3 seasonally weaker and Q4 typically stronger.

• Management was cautiously optimistic that global growth in 2013 would exceed 2012, with uncertainty expected to ease somewhat by year-end 2012.