Yahoo Finance Caterpillar stock declines on mixed Q4 earnings
Yahoo Finance Live anchors discuss fourth-quarter earnings for Caterpillar.
Video transcript
[AUDIO LOGO]
- So let's talk about Caterpillar, shall we? The company reporting mixed earnings for the fourth quarter. The construction equipment manufacturing missing estimates in the bottom line, but did see revenue increase 20% year over year. But its raw materials costs to continue to go up here. Freight costs as well continue to go up. So that seems to be what the problem is there are Caterpillar. It is having an effect on profit margins, and investors definitely not liking that.
There's also a goodwill impairment charge tied to its locomotive business. So that's also something that's putting some pressure here on the company, and that's why, you guys, the shares are down now. Caterpillar is frequently seen as a bellwether, right? Has a lot of geographic reach, touches a lot of different parts of the economy. So the fact that its sales beat, I guess, is encouraging on that front. But the fact that it's echoing, like we've talked about. Was it Colgate that talked about still rising costs as well? Like, companies are still suffering from these costs going higher.
- Yeah.
- The revenue double digit gains in a lot of businesses for Caterpillar, but I took a different approach this time. Usually, I focus in on their construction business. But if you go to Caterpillar's earnings release, go down to the last segment. That is the financial product segment. And here, I'm just looking for signs of economic stress. Are we in a recession? And I always, to your point, Julie, look at Caterpillar as an economic bellwether.
At the end of last year, past dues at CAT financial were 1.89%. That is down versus 1.94% at the end of 2021. So that is-- that's actually a good positive economic indicator. Write-offs were $46 million all of last year compared to $205 million in 2021. So if you're looking for signs of economic stress, you didn't really find it here in a Caterpillar which, of course, not only touches the US, but China, Asia, and others.
- We're talking about equipment financing just to be precise there with those financial products.
- But investors here today, perhaps, forward looking. And if you read into this one line from the chairman and CEO, Jim Umpleby, saying this was one of our best years in our nearly 100-year history. If there's anything that investors might take away from that, that signals tough comps in the future as well.
And then you also think about, perhaps, one of the bright spots that they could be able to capitalize on-- and you talked about the international portion of Caterpillar's business-- it's what type of stimulus in construction projects may actually take place, in China as well, and where they might be able to benefit from that. However, investors, perhaps, lingering on some of those tough comps that they're seeing be signaled, at least here in this report.
