Caterpillar Pares Guidance Amid Sluggish Demand -- Update
April 22 2016 - 12:02PM
Dow Jones News
By Bob Tita
Caterpillar Inc. on Friday cut its full-year revenue and profit
guidance as sales of its construction and mining equipment fell in
all regions.
Depressed global commodity prices and the slowdown in some
emerging markets have pared demand for Caterpillar's yellow
bulldozers, excavators, mining trucks and engines, and its
first-quarter earnings fell shy of expectations that had already
been lowered last month.
Caterpillar did report some improvement in the Chinese equipment
market and better-than-anticipated orders at a recent big trade
show in Europe. However, the company said the recent improvement in
some commodity prices may not be "sustainable or sufficient to
drive increased demand for equipment" as mining companies remain
committed to cutting equipment spending.
Rising volumes of commercial and residential construction in the
U.S. typically drive higher demand for building machinery, but
Caterpillar's sales of construction equipment in the North America
fell 18% during the quarter. The company said demand for new
equipment is largely being met by the glut of used machinery pulled
from idle frack oil and natural gas fields in North America.
The company now expects revenue of $40 billion to $42 billion
for 2016, paring the top end of its forecast from $44 billion.
Caterpillar had sales of $47 billion in 2015, and this would mark
the fourth year of declining sales.
Sales of machinery and engines dropped 27% for the quarter to
$8.8 billion. The engine business was especially weak, plunging 33%
on lower sales of engines to the energy industry and slumping sales
of railroad locomotives.
Caterpillar expects per-share profit of $3, or $3.70 excluding
restructuring costs, down from its previous outlook of $3.50
excluding restructuring expenses.
The company said the lower profit outlook reflects declining
sales and higher costs or scaling back operations and its
workforce.
For the quarter ended Jan. 30, Caterpillar reported a profit of
$271 million, or 46 cents a share, compared with $1.25 billion, or
$2.03 a share, in the year-earlier period. Excluding restructuring
costs, the company earned 67 cents a share. Analysts were expecting
68 cents a share and revenue of $9.4 billion. Caterpillar's overall
revenue, which also includes its financing operation, fell 26% to
$9.5 billion.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
April 22, 2016 11:47 ET (15:47 GMT)
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