Yesterday at the MINExpo conference, Caterpillar reduced its earnings outlook for 2015 – way further in advance than companies usually issue guidance.
Given the company’s position as the biggest manufacturer of construction equipment in the world, the move raised some eyebrows and even caused markets to fall near the close of trading yesterday.
Caterpillar had previously guided EPS of $15-20 per share, but CEO Douglas Oberhelman reduced it during the presentation:
Earnings per share of $12-18. Anne asked me right off the bat, “you’re lowering your guidance.” I’m not lowering our goal and intention. If it turns out that worldwide GDP growth is more like we thought it would be, and it comes around in 13, 14, 15, we’re going to go right back to $15-20…but losing 2011 and losing 2012 with a reasonable level of growth has just delayed when that is going to happen.
I don’t think that’s a big surprise to anybody…I think it’s prudent, given what’s happened here in 2011 and 2012, to readjust a little bit for 2015.
The reason the company did this is because Caterpillar had initially given a 2015 outlook based on an acquisition last year that was supposed to boost earnings a few years in the future, according to Reuters:
The new forecast comes a year after Caterpillar paid $7.6 billion for mining equipment maker Bucyrus International – the largest deal in its history – and bullishly predicted the deal would help boost earnings to as much as $20 per share by 2015.
Large companies tend not to issue earnings forecasts for so many years into the future. Caterpillar did so partly to reassure those on Wall Street who questioned the timing of the Bucyrus deal while the economy remained weak.
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