Earnings Watch: Busy week with focus on Caterpillar, Eli Lilly, and Siemens

Caterpillar: Headwinds to materialize in 2024 on impact from higher interest rates

Caterpillar reports Q4 earnings today at 11:30 GMT with analysts expecting revenue of $16.5bn flat compared to a year ago, and EBITDA of $3.6bn up from $3.4bn a year ago. The world’s largest machinery equipment company is likely facing a transition year in 2024 as the impact from higher interest rates is finally hitting the global construction industry with orders and the backlog expected to decline in 2024. So why is it worth to watch Caterpillar earnings? The reason is that global construction and mining are important cyclical parts of the economy and any pickup will be seen in Caterpillar’s orders and thus the company’s outlook gives clues to economic growth.

Eli Lilly: Riding the wave in obesity drug boom

Eli Lilly reports Q4 earnings tomorrow before the US market open with analysts expecting revenue of $9bn up 23% y/y and EBITDA of $2.5bn unchanged from a year ago. While Mounjaro, the GLP-1 approved for treating diabetes, will dominate the figures for Eli Lilly, investors will focus on Zepbound, the GLP-1 drug approved for obesity treatment, because this is where the future growth will come from. Especially, guidance on Zepbound revenue for 2024 will be key for investors in order to compare equity valuations against that of Novo Nordisk which is so far leading the initial growth wave in obesity drugs. Analysts expect FY24 revenue growth of 17% for Eli Lilly and 22% for Novo Nordisk.

Siemens: Is the global industrial sector turning a corner?

Siemens reports FY24 Q1 (ending 31 Dec) earnings on Thursday before the market open in Europe with analysts expecting revenue €18.8bn up 4% y/y and EBITDA of €3.2bn unchanged compared to a year ago. The key question for investors is whether the headwinds in orders and destocking ended in the previous fiscal quarter and the quarters ahead would see improving growth figures. Siemens’ operating margin may also be under pressure for some quarter due to wage pressures until productivity initiatives flow through the business group.

A key test of the wind turbine industry

Since the pandemic broke out impacting global supply chains and commodity markets for the key materials used in wind turbines the wind turbine industry has been plagued by lower growth compared to the growth years 2012-2019. Higher project installation costs have negatively impacted the competitiveness of wind power relative to solar. Recently the lower natural gas prices in the US, and less so in Europe, have further eroded the competitiveness in the short-term. Last year, Siemens Energy also revealed design errors on its newest onshore turbine models which further painted a picture of an industry in a deep crisis. Finally, cheaper Chinese manufacturers are pressuring wind turbine manufacturers in the US and Europe, and industrial policies of slapping tariffs on imported Chinese turbines might come in the future.

On Wednesday, the three giants in the wind industry, Siemens Energy, Vestas, and Orsted, will report earnings and while sentiment has shifted for the better for Siemens Energy and Vestas, investors are super nervous about Orsted’s results and especially business outlook. For investors interested in renewable energy earnings releases from these three companies are a must watch.

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