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Caterpillar Stock Slides As Margin Pressures Cloud Quarterly Earnings Beat

Caterpillar posts better-than-expected second-quarter earnings as construction sales surged amid renewed post-pandemic demand.

Caterpillar (CAT) - Get Caterpillar Inc. Report posted better-than-expected second-quarter earnings Friday as construction sales surged amid renewed post-pandemic demand and a potential boost from U.S. infrastructure spending.

Shares slipped lower, however, as the industrial group cautioned that operating profit margins would narrow over the coming months.

Caterpillar said adjusted profits for the three months ending in June were pegged at $2.60 per share, up 152% from the same period last year and well ahead of the Street consensus forecast of $2.40 per share. Group revenues, Caterpillar said, rose 29% to $12.9 billion, a figure that again bested analysts' estimates of a $12.6 billion tally.

Operating profit margin was 13.9% for the quarter, down from rising from 15.3% in the previous three month period, Caterpillar said. Third quarter margins, Caterpillar said, should be higher than last year as volumes improve, but will likely moderate from current levels. Caterpillar also noted it ended the quarter with $10.8 billion in cash, compared to $11.3 billon after the first three months of the year.

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"Our dedicated global team remains focused on serving our customers, executing our strategy and investing for future profitable growth," said CEO Jim Umpleby. "We're encouraged by higher sales and revenues across all regions and in our three primary segments, which reflect continued improvement in our end markets."  

Dow component Caterpillar shares were marked 2.7% lower in early trading immediately following the earnings release to change hands at $206.75 each, a move that would trim the stock's year-to-date gain to around 13%.

Construction sales were up 40% to $5.65 billion, Caterpillar said, "driven by higher end-user demand for equipment and aftermarket parts and the impact from changes in dealer inventories. Overall, dealers decreased inventories more during the second quarter of 2020 than during the second quarter of 2021.

Resource, energy and transportation sales were up 41% to $2.579 billion thanks to "higher sales volume driven by higher end-user demand for equipment and aftermarket parts and the impacts of changes in dealer inventories."