Shares of Caterpillar drop 2.8% after Dow component reports 31% decline in revenue

Industrial machinery manufacturer Caterpillar said Friday that cost reduction and prioritized spending helped it offset a $1.4 billion decline in dealer inventories during the second quarter and post better-than-expected results.

The Deerfield, Illinois-based equipment maker posted adjusted per-share earnings of $1.03 on revenues of $10 billion. Analysts were expecting revenue of just $9.38 billion for the quarter, according to the consensus from Refinitiv.

Though better than what analysts were expecting, $10 billion in sales represented a 31% decrease compared with the $14.4 billion the company reported in the second quarter of 2019.

Caterpillar’s stock, a member of the Dow Jones Industrial Average, fell 2.8% during Friday’s session following the results.

The company said a persistent decline in demand for its equipment as a result of the Covid-19 pandemic caused dealers to cut machinery and engine inventories about $1.4 billion in the three months ended June 30 versus an increase of about $500 million a year earlier.

It’s for that reason that cost-cutting initiatives and spending austerity were so critical to the company’s success in the second quarter, management said in a statement accompanying the financial results.