Caterpillar's slump continues with lower earnings forecast
The slump in global demand for energy machinery and construction equipment dealt a stiff blow to Caterpillar in the third quarter as the manufacturing giant's revenue and profit slipped and the company lowered its earnings forecast.
About a month after announcing steep cuts to its workforce to adjust to lower demand, Caterpillar (CAT) said its earnings-per-share expectation for the full year is $3.70, down from a previous forecast of $4.70.
Restructuring costs — the bill for cutting jobs and production capacity — for the full year will be $800 million, up from a previous expectation of $250 million. The company last month revealed plans to shed 5,000 jobs by the end of 2016.
When excluding those one-time costs, earnings per share for the full year is expected to be $4.60, down from a previous outlook of $5.
The company said its third-quarter revenue plunged 19% from $13.5 billion a year ago to $11 billion this year. Profit fell 64% to $368 million.
Caterpillar shares fell 3% in pre-market trading to $67.77.
The downturn in the energy sector, where companies are struggling with low oil prices, is battering Caterpillar. Sales plunged 25% in that segment in the third quarter, compared to the same period a year earlier, falling to $4.2 billion. The company posted a $516 million loss in the energy division for the quarter.
But Caterpillar CEO Doug Oberhelman called the market for his company's goods "extremely challenging for most of the key industries we serve."
The company projected a 5% decline in revenue in 2016, compared to 2016. That would include a 5% to 10% decrease in sales in the energy and transportation sector and a 10% drop in the resource industries area.
“Managing through cyclicality has been critical to Caterpillar’s success for the past 90 years; it’s nothing new for us or our customers," Oberhelman said. "We’re confident in the long-term success of the industries we’re in, and together with our customers, we’ll weather today’s challenging market conditions."
Follow Paste BN reporter Nathan Bomey on Twitter @NathanBomey.