Caterpillar muscled past first-quarter earnings estimates early Thursday, managing a slight profit despite higher costs. However, CAT stock fell Thursday, a slight drag on the Dow Jones . United Rentals stock rose after posting strong results and raising its outlook late Wednesday.
"I'm proud of our global team's performance as they achieved double-digit sales growth despite ongoing supply chain challenges," Caterpillar CEO Jim Umpleby said in a statement.
Caterpillar noted that sales got a lift from dealer inventory stocking, which picked up relative to the year-ago quarter. However, higher costs narrowed Caterpillar's operating profit margin to 13.7% from 15.3% a year ago.
After Wednesday's close, United Rentals offered more bullish commentary about its outlook.
"The momentum we carried into the year accelerated quickly, and our markets are continuing to trend up," with the busy season coming up, United Rentals CEO Matthew Flannery said in an earnings statement.
Caterpillar Earnings
Estimates: Analysts expected Caterpillar profit to slip 9% to $2.60 per share, despite 13% revenue growth to $13.4 billion.
Results: Caterpillar adjusted EPS rose by a penny to $2.87, less than 1%, as revenue grew 14% to $13.59 billion.
Outlook: Caterpillar said it expects Q2 sales to exceed Q1 levels amid strong end-user demand and pricing. Analysts are expecting $14.6 billion in sales this quarter. The company said its profit margin should improve in the second half of 2022.
CAT stock just made a run at an all-time high last week, surging along with Nucor and Steel Dynamics as those steel producers predicted record profits in Q2 amid strong nonresidential construction demand. The energy sector is also stoking steel demand amid the jump in oil prices following Russia's invasion of Ukraine.
But the higher steel prices contributing to record steel profits are among Caterpillar's inflation and supply-chain challenges. Cost pressures, along with worries that Fed policy may short-circuit the growth outlook, help explain why CAT stock reversed lower last week, ending the week down 5%.
CAT stock fell 0.7% to 212.44 on Thursday, but well off morning lows and back above its 50-day moving average.
United Rentals
Estimates: Analysts saw Q1 earnings up 44% to $4.96 per share on revenue growth of 19% to $2.446 billion, according to FactSet.
Results: Adjusted earnings surged 66% to $5.73 a share. Rental revenue surged more than 30%, while used equipment sales declined 21.5%, generating overall revenue growth of 23% to $2.524 billion.
Outlook: United Rentals raised its guidance range for full-year revenue by $450 million to a range of $11.1-$11.5 billion. Adjusted EBITDA guidance is now $250 million higher, ranging from $5.2-$5.4 billion.
URI stock rose 2.9% to 318.50 on Thursday. That still leaves URI stock below its 50-day average.
United Rentals stock had fallen back to test lows from early March, even as equipment demand shows strength. Yet URI stock arguably is well-positioned to sidestep much of the inflationary, supply-chain and economic hardships that have investors worried.
In an April 14 research report, Deutsche Bank analyst Nicole DeBlase named URI a short-term buy. URI stock, she wrote, "ticks a lot of boxes that investors are looking for right now — limited exposure to Europe and China and less supply chain risk."
In fact, DeBlase says, supply-chain issues holding back new equipment sales work in favor of United Rentals by bolstering demand for rental equipment.
