Caterpillar’s Earnings Smashed Forecasts. There Are 2 Key Reasons.

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Caterpillar dealers are rebuilding their inventories.

Scott Olson/Getty Images


left analysts’ expectations for its first-quarter sales and earnings in the dust in a burst of outperformance linked both to its business and to Wall Street. The good news had Cat stock moving higher early Thursday.

Shares were up about 1.2% in premarket trading, while futures on the

S&P 500

and Dow Jones Industrial Average futures were up about 0.7% and 0.4% respectively. The stock may not be rising more sharply because it is already off to a good start in 2021. Year to date, shares are up about 28%, better than the comparable gains of the overall market.


(ticker: CAT) earned $2.87 in adjusted earnings per share from $11.9 billion in sales. Analysts were projecting $1.95 in per-share earnings from $10.5 billion in sales.

That means Cat’s earnings exceeded estimates by almost 50%. That was good, but the real story is sales. Cat’s sales were about 13% higher than expected, one of the company’s biggest sales “beats” of the past decade.

Restocking by dealers, who buy equipment from the company to sell to the public, is the fundamental reason for the surprise. “Dealers increased their inventories more during the first quarter of 2021 than during the first quarter of 2020,” reads the company’s news release. Dealers’ inventories dwindled throughout the pandemic, but as demand has picked up, dealers wanted to have machines to sell.

Sales by dealers to retail customers in the construction industry grew 17% in the first quarter, while the company’s sales to dealers in that industry grew 27%. Retail sales to the mining industry were flat, but mining-related sales to dealers grew 6% year over year in the first quarter. Both segments highlighted the impact of restocking.

The Wall Street reason Cat’s earnings were so decisively stronger than expected is that the company didn’t tell analysts what to anticipate. Caterpillar stopped giving financial forecasts back in March 2020 and hasn’t resumed.

Investors and analysts like to have their hands held. It is hard to project the financial performance of large, cyclical companies such as Caterpillar. This time, the lack of guidance meant the Street wasn’t upbeat enough in projecting the impact of restocking on the first-quarter results.

Caterpillar scheduled a conference call to discuss the results at 8:30 a.m. Eastern time to discuss the results. Investors and analysts will be interested to hear about inventory levels, about the global economic recovery, and how both will affect sales during the rest of 2021.

Write to Al Root at

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