Dive Brief:
- The caterpillar revenue was down 4% year over year due to a decline in construction demand in several key regions, including North America and Europe, according to the heavy machinery maker’s third-quarter earnings report released on Oct. 30.
- Within its Construction Industries segment, which includes sales of heavy equipment for construction projects, sales volume was down 7% year over year, driven by dealers buying less equipment and tough comparisons with last year’s high third quarter, Caterpillar CEO Jim Umpleby said during an Oct. 30 earnings call with analysts.
- “Sales and revenue were down 4% in the third quarter from last year, below our expectations due to the impact of lower-than-expected sales to users in the construction industries,” Umpleby said, according to a transcript of the earnings call. The Irving, Texas-based company’s financial health is considered a benchmark for many segments of the economy, including construction, mining and energy.
Diving knowledge:
Caterpillar’s price realization, or the ability to sell products at the prices it sets, is expected to trend downward in the fourth quarter, Chief Financial Officer Andrew Bonfield said on the call.
“Since early 2022, price realization has been strong and often exceeded our expectations. Over the past few quarters, we have highlighted that price will begin to moderate in the second half of this year,” Bonfield said . “In the third quarter, this moderation began to occur as price realization was lower than in previous quarters.”
In North America, revenue declined about 11 percent, with weaker demand also in Europe, Africa and the Middle East, where revenue fell about 15 percent, according to the earnings call. Its Asia Pacific region also saw a similar decline, with a 12% drop. The Latin American segment was the lone bright spot, up 12%.
Despite expectations that lower sales in its construction industries segment would persist in the fourth quarter, Umpleby remained optimistic about the long-term demand outlook due to funding from the Jobs and Infrastructure Investments Act .
Umpleby said about 27% of the $348 billion full IIJA funding has been spent by August 2024, with 47% already committed, according to the American Association of Highway and Transportation Builders. According to Caterpillar, this unspent funding should help drive infrastructure-related demand in the coming quarters.
“From a positive perspective, we expect the government-related infrastructure to remain healthy,” Umpleby said. “There’s a lot of infrastructure activity that our dealers are working with their customers to help them. So we feel good about that as well.”
