Caterpillar Slashes Guidance, Announces More Job Cuts--Update
July 26 2016 - 9:42AM
Dow Jones News
By Lisa Beilfuss
Caterpillar Inc. slashed its outlook and said it would cut more
jobs this year as the industrial giant continues to try to steady
its business amid depressed demand from the oil and gas industries
and increased global uncertainty.
The company now expects to earn $3.55 a share this year,
excluding restructuring costs. Caterpillar in April cut its
forecast for the year, predicting $3.70 a share without
restructuring costs.
Like many U.S. manufacturers that do significant business
abroad, the Peoria, Ill., based company has been hurt by the strong
U.S. dollar that makes its equipment more expensive in foreign
currencies. Brexit gave the dollar another lift, and uncertainty
over the U.K.'s decision to leave the European Union has further
reduced some firms' investment spending. Meanwhile, many customers
connected to the energy industry remain under pressure and have
significantly pulled in spending.
Fellow manufacturer 3M Co. also reported second-quarter results
Tuesday. That company missed sales expectations and pulled in the
high-end of its full-year guidance.
"We're cautious as we enter the second half of the year," said
Caterpillar Chief Executive Doug Oberhelman. "We're not expecting
an upturn in important industries like mining, oil and gas and rail
to happen this year," he said. The company added that global growth
isn't sufficient to drive improvement in most of its markets, with
commodity prices stabilized but at low levels and turmoil from
Brexit and Turkey adding to risks across Europe.
As such, Caterpillar said it would further reduce its ranks by
an unspecified number that adds to previously announced layoffs of
10,000. As of June 30, the company employed about 113,000 workers.
Caterpillar has also said it would shut or consolidate 20 plants by
the end of the 2018. So far, Caterpillar has cut about 5,300
positions and announced the closing of a handful of smaller
plants.
Rising restructuring costs will cut into earnings this year,
while sales are also expected to be weaker than previously thought.
Caterpillar now sees full-year revenue coming in between $40 and
$40.5 billion versus its April forecast of $40 billion to $42
billion.
In the latest period, revenue fell across all segments, paced by
a 31% drop across Latin America, where Brazilian and Mexican
economies remain particular soft spots. Sales across North America
fell 16%, largely because of the energy price collapse, while
Caterpillar's Europe, Africa and Middle East and Asia Pacific
businesses also posted double-digit declines.
In all for the June quarter, the company reported a profit of
$550 million, or 93 cents a share, down from $802 million, or $1.31
a share, a year earlier. Excluding restructuring costs, earnings
per share fell to $1.09 from $1.40.
Revenue slid 16% to $10.34 billion.
Analysts predicted 96 cents in adjusted per-share profit on
$10.11 billion in revenue, according to Thomson Reuters.
Caterpillar shares, up 16% this year through Monday's close,
declined 1.2% in premarket trading.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
July 26, 2016 09:27 ET (13:27 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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