Why Did Caterpillar Miss Analysts’ 4Q16 Revenue Estimates?
Caterpillar’s regional sales
Caterpillar (CAT) derived a major portion of its revenues from North America. For 4Q16, CAT reported ~$4.2 billion in sales from North America compared to ~$4.8 billion during 4Q15. Notably, the company posted a 9.6% increase in its sales in the Asia-Pacific region from ~$2.2 billion in 4Q15.
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During 4Q16, Caterpillar witnessed strong growth in the company’s Construction Industries segment’s sales in the Asia-Pacific region, primarily driven by demand from China. Also, favorable changes in dealer inventory levels allowed the company to report higher sales in this region on a YoY basis.
Sales from EAME (Europe, Africa, and Middle East) were down to ~$2.1 billion compared to ~$2.9 billion in 4Q15. According to company filings, the fall in EAME sales was primarily due to lower end-user demand and continued low oil prices in the Middle East, which limited investment in the region. Sales from Latin America fell to $0.9 billion from ~$1.1 billion.
For 4Q16, Caterpillar (CAT) reported consolidated sales of ~$9.6 billion compared to analysts’ expectations of ~$9.9 billion. The deviation from analysts’ expectations was primarily due to the company’s lower-than-expected sales performance in EAME and North America.
Although some commodity prices improved in 4Q16, the company stated that this improvement was too recent to significantly impact its sales in 4Q16. Also, lower price realizations in its Resource Industries and Energy & Transportation segments had a negative impact on the company’s revenues in 4Q16.
Next, we’ll look into Caterpillar’s restructuring initiatives and proposed cost reductions in 2017.