Q3 Financials: Cat off 4%, Stanley down 5%, SiteOne up
Caterpillar sales off 4 percent in Q3
On Oct. 30, Caterpillar Inc. announced its Q3 2024 financial results, reporting a 4 percent drop in total sales and revenue compared with last year. Cat reported $16.106 billion in sales and revenue, a decrease of $704 million, compared with $16.810 billion in the third quarter of 2023. The company said the decrease was primarily due to lower sales volume to end users ($759 million). In addition, changes in dealer inventories had an unfavorable impact to sales volume. Dealer inventory increased less during the third quarter of 2024 than during the third quarter of 2023.
In the three primary segments, sales were lower in Construction Industries (including outdoor power equipment) and Resource Industries and higher in Energy & Transportation. Operating profit margin was 19.5% for the third quarter of 2024, compared with 20.5% for the third quarter of 2023.
“I’d like to thank our global team for delivering strong adjusted operating profit margin and adjusted profit per share while generating robust ME&T free cash flow,” said Chairman and CEO Jim Umpleby. “Our third-quarter results reflect the benefit of the diversity of our end markets.”
Construction Industries
Caterpillar reports its Construction Industries’ total sales were $6.345 billion in the third quarter of 2024, a decrease of $654 million, or 9%, compared with $6.999 billion in the third quarter of 2023. The decrease was primarily due to lower sales of equipment to end users of $458 million and unfavorable price realization of $147 million.
In North America, sales decreased primarily due to lower sales volume. Lower sales volume was mainly driven by lower sales of equipment to end users and the impact from changes in dealer inventories. Dealer inventory increased less during the third quarter of 2024 than during the third quarter of 2023.
Outlook
Caterpillar said 2024 sales would be slightly below earlier expectations. Over the summer, it said that sales this year would decline from 2023 levels, after previously guiding to flat sales.
Sales from Caterpillar’s engine and transportation business rose from continued strong demand for electric generators used in new data centers. The manufacturer said it plans to add more production capacity for the large engines used for generators. It is the second expansion announced this year.
Stanley down 5 percent
Reporting Q3 2024 financials on Oct. 29, Stanley Black & Decker announced revenues for the period of $3.8 Billion, down 5 percent versus Q3 2023. The company said that growth in Dewalt Was offset by mixed end-market demand. It also said that infrastructure divestiture impacted revenue growth by -2 percent.
Gross margin for the quarter was 29.9%, up 310 basis points versus the prior year rate of 26.8%. Adjusted gross margin was 30.5%, up 290 basis points versus the prior year, primarily due to the supply chain transformation.
Tools & Outdoor net sales were down 3% versus third quarter 2023, driven by volume (-3%) and currency (-1%), partially offset by price (+1%). Organic revenue was down 2%, as growth in Dewalt was offset by the weak consumer and DIY backdrop. The Tools & Outdoor segment margin was 10.0%, up 190 basis points versus prior year. Adjusted segment margin was 11.1%, up 180 basis points versus third quarter 2023, primarily due to supply chain transformation benefits, which were partially offset by growth investments.
Regional organic revenues:
- North America (-4%)
- Europe (+1%)
- Rest of world (+6%)
“While a weak consumer and automotive production backdrop impacted organic revenue, we capitalized on relative bright spots and delivered our sixth consecutive quarter of Dewalt growth as well as higher sales in aerospace fasteners,” said Donald Allan, Jr., Stanley Black & Decker president & CEO.
“We remain focused on executing against areas primarily within our control: our supply chain transformation and accelerating share gain. This transformation continues to reshape our cost structure and fund new growth investments, which together are expected to further strengthen our powerful brands, accelerate innovation and enhance our in-market activation to capture the compelling long-term opportunities in our industry.”
Stanley Black & Decker multi-year strategic focus:
- Advancing innovation, electrification, and global market penetration to achieve organic revenue growth of 2 to 3 times the market
- Streamlining and simplifying the organization, and investing in initiatives that more directly impact our customers and end users
- Returning adjusted gross margins to historical 35%+ levels by accelerating the operations and supply chain transformation to improve fill rates and better match inventory with customer demand
Company creates plan for Trump Tariffs
According to reporting from the Wall Street Journal reports, Stanley Black & Decker officials said the company will likely raise prices and shift production around the globe if Donald Trump is elected president and levies fresh tariffs on goods coming from China. Donald Allan said on Oct. 29 that the company has spent months creating a plan for dealing with larger tariffs under a new Trump administration.
During Stanley’s third-quarter earnings call, Allan said while the potential tariff regimen remains unclear, the company would respond to new tariffs with price increases. Stanley could also move production and parts of its supply chain out of China to other Asian countries or to Mexico, Allan said. A significant shift to the U.S. is unlikely, he said.
“It’s just not cost effective to do,” he said. “And there’s questions about whether we even have the labor to actually do that in this country.” Stanley has spent the last two years cutting expenses in a bid to increase its profits. That has included shuttering U.S. factories and trimming the number of products it makes. The company has said it will continue reducing its plants worldwide in 2025.
SiteOne reports gain for Q3, expects to close 16 branches in Q4.
SiteOne Landscape Supply announced earnings for Q3 2024 ended September 29, 2024. Net sales for the Q3 increased 6 percent to $1.21 billion compared to $1.15 billion for Q3 2023. Organic daily sales decreased 1% compared to the prior-year period due to price deflation for commodity products more than offsetting positive volume growth. Acquisitions contributed $77.3 million, or 7%, to net sales growth for the quarter.
Gross profit increased 6% to $411.0 million for the quarter this year compared to $388.1 million for the prior-year period. Gross margin improved 10 basis points to 34.0% reflecting the positive impact from acquisitions, partially offset by lower price realization in the Base Business compared to the prior year period.
“During the quarter we continued to face market headwinds with 3% price deflation and a softer repair and remodel market. Given these, we were pleased to achieve 2% Organic Daily Sales volume growth to partially offset the price decline,” said Doug Black, SiteOne’s chairman and CEO. “Overall, our teams are executing our strategy, outperforming the market with organic sales volume growth, and pushing forward on our commercial and operational initiatives to yield organic growth and adjusted EBITDA margin expansion in 2025 and beyond. With a clear leadership position in wholesale landscape distribution, strong teams, a robust acquisition pipeline, and a winning strategy to create value for our stakeholders, we are confident in our ability to perform and grow in the years to come.”
Outlook
“Our maintenance and new construction markets remain resilient, but we continue to experience soft demand driven primarily by a weaker repair and remodel end market. In addition, we estimate that hurricanes Helene and Milton have negatively impacted net sales by approximately $15 million ($8 million in the fourth quarter). The pricing environment continues to be challenging and will have a negative impact on both our sales growth and gross margin,” Doug Black continued. “We are managing our SG&A tightly and making the necessary changes to optimize our cost structure for the long run. As a part of these efforts, we plan to consolidate or close 16 branches in the fourth quarter, resulting in an expected one-time charge to adjusted EBITDA of approximately $5 million.”
