On The Fly: What to watch in Caterpillar's earnings report
Caterpillar (CAT) is scheduled to report results of its second fiscal quarter before the market opens on Tuesday, July 26, with a conference call scheduled for 11:00 am ET. What to watch for: 1. RESTRUCTURING: Investors will be looking for more clarity on Caterpillar's restructuring and cost reduction plan, in which the company announced it will close its less-profitable factories and cut 10,000 jobs. The plan, originally announced September 24, 2015, began in late 2015 and was said at the time to continue through 2018. The most recent action reported from the plan is Caterpillar's closing of five manufacturing plants in North Carolina, South Carolina, Florida and Mississippi in late April, resulting in about 820 layoffs. A Wall Street Journal report at that time indicated that Caterpillar has laid off approximately 5,300 workers to date as a part of the restructuring plan. 2. SLUMPING MACHINERY SALES: On July 25, Caterpillar disclosed that machine sales were down 12% in the rolling three-month period ending as of June. The regulatory filing also included sales for the rolling three-month periods ending in April and May, both of which had total machine sales down 12%, respectively. On the same day, Bloomberg noted that Caterpillar's sales have declined in the last three year, a period the company has called its "longest downturn ever," driven by a decline in drilling, mining, and building. 3. BREXIT: Caterpillar, with sixteen manufacturing plants in Great Britain, is significantly invested in the United Kingdom. Before the referendum vote, on June 17, Caterpillar director in the U.K. Mark Dorsett said British membership is "fundamental to their business interests" and signed a letter titled "Brexit would hit U.K. growth and impede foreign investment." On June 21, Zacks Investment Research listed the company as one of four stocks, along with JP Morgan Chase (JPM), eBay (EBAY), and BP (BP), that could plunge as a result of the U.K. referendum to leave the European Union. Two days later, Zacks was proven correct when Caterpillar fell 4.5% after news of the Brexit vote, outpacing broader market losses. 4. CUBA: On May 11, Reuters reported that Caterpillar Chief Executive Officer Doug Oberhelman said that Caterpillar is ready to move into the Cuban market once the United States lifts the trade embargo with the impoverished Caribbean nation.