Caterpillar (CAT) Q3 2018 earnings summary

Executive summary

• Q3 sales and revenues rose 18% YoY to $13.510B; operating profit increased 41% to $2.135B and diluted EPS reached a record $2.88.

• Adjusted EPS was $2.86, excluding restructuring costs and the net deferred-tax benefit; stronger volume and favorable pricing supported results.

• Demand improved across the three primary segments, while manufacturing, freight and other costs increased.

Financial highlights

• Q3 revenue was $13.510B vs. $11.413B; net profit was $1.727B vs. $1.059B, and diluted EPS was $2.88 vs. $1.77.

• Adjusted EPS was $2.86 vs. $1.95, excluding restructuring costs and the deferred-tax balance benefit in 2018 and restructuring costs in 2017.

• Higher sales volume added $793M and favorable price realization $155M to operating profit; manufacturing costs rose $205M.

• Manufacturing costs included higher steel and tariff costs; higher input costs and freight exceeded Q3 price realization by $50M.

• 9M revenue increased to $40.380B from $32.566B; operating profit was $6.410B vs. $3.073B and diluted EPS was $8.45 vs. $3.44.

Outlook and guidance

• FY 2018 diluted EPS outlook was $10.65–$11.65; adjusted EPS guidance remained $11.00–$12.00.

• FY guidance included ~$400M of restructuring costs and a $95M deferred-tax-balance adjustment; restructuring costs were expected to decline in 2019.

• Q4 was expected to follow normal seasonal sales patterns, with margins broadly similar to the 16.6% year-to-date level.

• 2019 sales and profits were expected to improve YoY; January price increases of 1%–4% were announced, with most expected to take effect in 2019.

• 2018 tariff costs were forecast at the low end of the prior $100M–$200M range; ME&T capital expenditures were forecast at $1.0B–$1.5B.