CAT Caterpillar Inc

   (FROM THE WALL STREET JOURNAL 1/29/16) 
   By Bob Tita 

Caterpillar Inc. warned its revenue this year could sink to a six-year low on falling demand but held out hope for better earnings as the heavy equipment maker swung to a fourth-quarter loss on restructuring expenses.

The mining and construction equipment supplier said depressed prices for iron ore, copper and other commodities, cheaper oil and weakness in developing countries are weighing on sales of its bulldozers, excavators, mining trucks and engines.

The Peoria, Ill.-based company now expects 2016 revenue of about $42 billion, more than a third below the company's $65.9 billion four years ago. The projected 10% decline is twice what it had forecast for the year in October and would leave revenue at below what it had before its acquisition of mining equipment company Bucyrus International Inc. in 2011.

Caterpillar forecast 2016 earnings of $4 a share, excluding additional restructuring costs and including the benefit of lower pension costs, up from $3.50 a share in adjusted earnings in 2015. Analysts were expecting $3.48 a share excluding charges. Its pension costs this year are expected to fall on a change in accounting practices, a move that provided most of the higher per-share profit in the company's forecast.

The better-than-expected profit view helped lift the company's shares. Caterpillar gained 4.7% to $61.08 a share on Thursday.

The Bucyrus acquisition -- the largest in the 90-year-old company's history -- represented a doubling down on global demand for minerals. At the same time, Caterpillar aggressively added plants in overseas markets to capture surging demand for construction machinery. But both bets struggled as commodity prices fell and emerging economies contracted.

Caterpillar Chief Executive Doug Oberhelman said he's not expecting a recovery in commodity or oil prices in 2016 or much economic expansion in developing countries, such as Brazil and Russia.

"I would expect bumps in the road all through the year," he said on a conference call with analysts. "We're really going into [2016] with eyes wide open."

Profit for 2015 dropped 43% from a year earlier to $2.1 billion on revenue down 15%, to $47 billion.

Fourth-quarter revenue tumbled 23% below the same period a year earlier to $11.03 billion as equipment and engine sales declined in all of the company's geographic markets.

Analysts had forecast $11.4 billion in revenue. Restructuring costs pushed Caterpillar to a loss of $87 million, or 15 cents a share, for the quarter compared with a prior-year profit of $757 million, or $1.23 a share. Excluding 89-cents-a-share in restructuring costs, the company reported earnings of 74 cents a share, topping analysts' forecast of 69 cents a share.

Caterpillar, which is already planning to cut 10,000 jobs in the coming years, said it would book $400 million in charges for restructuring operations in 2016 to lower expenses after spending $908 million on restructuring in 2015.

(END) Dow Jones Newswires

January 29, 2016 02:47 ET (07:47 GMT)

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