Caterpillar fourth-quarter results take hit but outlook lifts stock

Caterpillar Thursday reported results that showed a continued slump across most of its businesses, but forecast earnings above estimates for 2016, sending shares up nearly 3 percent.

The world’s largest construction and mining equipment maker has been restructuring aggressively to cut costs because of slower growth in markets including China and Brazil and plunging commodity prices that have hurt customer demand.

The company warned that 2016 would be another grim year, but said its focus on costs was paying off.
“Cost management, restructuring actions … are helping the company while sales and revenues remain under pressure from weak commodity prices and slowing economic growth in developing countries,” Chief Executive Doug Oberhelman said. “We are benefiting now and expect to even more in the future when markets rebound.”

The Peoria, Illinois-based company said its outlook for 2016 “does not anticipate improvement in world economic growth or commodity prices.”

Caterpillar sees 2016 revenue within a range of $40 billion to $44 billion. The midpoint of that range, $42 billion, is around $3.5 billion below its forecast in October.

Caterpillar expects full-year 2016 earnings of $4.00 per share, excluding restructuring costs, compared with the average estimate of $3.48 per share, according to Thomson Reuters I/B/E/S. Including restructuring costs, Caterpillar said it expects 2016 EPS of $3.50.

Full-year earnings per share in 2015 were $4.64. Morningstar analyst Kwame Webb said he thought the company’s earnings estimates were too optimistic given the poor construction outlook in China and Brazil. Caterpillar said it expected its construction revenue would be down 5 to 10 percent this year.

“Caterpillar will see downward pressure due to construction and they will probably have to get a little more conservative,” Webb said. “This remains a company in a very tough position.”

Caterpillar said in September it would cut as many as 10,000 jobs through 2018.

The company said on Thursday that 2015 restructuring costs were higher than expected at $908 million. Caterpillar anticipates further restructuring costs of about $400 million in 2016.

Total sales and revenue fell to $11.03 billion in the fourth quarter, from $14.24 billion a year earlier.
Caterpillar reported a quarterly loss of $87 million, or 15 cents per share, compared with a profit of $757 million, or $1.23 per share, a year earlier.

Excluding restructuring costs, Caterpillar earned 74 cents per share, compared with the average analyst estimate of 69 cents.

Caterpillar shares were up 2.5 percent at $59.78.


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