Global Bellwether Caterpillar Had A Bad Quarter And Its Outlook Stinks

Caterpillar just announced its Q3 financial results, and the numbers look weak.

Earnings came in at $US1.45 per share, which was much weaker than the $US1.67 expected by analysts.

Revenue of $US13.42 billion was below the $US14.47 billion expected.

The stock is down 3% in pre-market trading.

“This year has proven to be difficult, with expected sales and revenues nearly $US11 billion lower than last year,” said CEO Doug Oberhelman. “That is a 17 per cent decline from 2012, with about 75 per cent of the drop from Resource Industries, which is principally mining. We expect Resource Industries to be down close to 40 per cent for the full year and Power Systems’ and Construction Industries’ sales to each be down about 5 per cent.”

“Not only is mining down from 2012, the demand for equipment has been difficult to forecast,” said management in the company earnings announcement. “Orders for new mining equipment began to drop significantly in mid-2012 and have continued at very low levels. As a result of weak orders and feedback from end users, the sales and revenues outlook provided in January of 2013 included a decline in mining sales. “

Their revised outlook: “We now expect 2013 sales and revenues of about $US55 billion and profit per share of about $US5.50. The previous outlook for 2013 sales and revenues was a range of $US56 to $US58 billion with profit per share of about $US6.50 at the middle of that range.”

Caterpillar manufactures construction and mining equipment that get used all over the world. As such, it is a useful indicator of global economic activity.

Here’s some macro commentary from the earnings announcement:

From an economic standpoint, the company expects better world growth in 2014. However, significant risks and uncertainties remain that could temper global economic growth. The direction of U.S. fiscal and monetary policy remains uncertain; Eurozone economies are far from healthy and China continues to transition to a more consumer-demand led economy. In addition, despite higher mine production around the world, new orders for mining equipment remain very low. As a result, the company is holding its outlook for 2014 sales and revenues flat with 2013 in a plus or minus 5 per cent range. The company expects sales growth in Construction Industries, relatively flat sales in Power Systems and a decline in Resource Industries’ sales.

“We can’t change the economy or industry demand, but we’ve taken many actions to align our costs with the environment we’re in currently,” said Oberhelman.

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