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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Caterpillar Inc | NYSE:CAT | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 331.07 | 97 | 09:43:48 |
By James R. Hagerty
Caterpillar Inc. raised its earnings forecast for 2015 but still expects to fall well short of last year's level amid falling sales of equipment related to oil and gas exploration and continued weakness in mining.
The Peoria, Ill.-based maker of construction and mining equipment said it expects earnings per share of about $4.70 for the full year, down from $5.88 in 2014. Previously, Caterpillar was forecasting earnings of $4.60 per share in 2015.
Profit in the first quarter rose 20% to $1.11 billion from $922 million a year earlier, Caterpillar said. Earnings per share increased to $1.81 from $1.44. Analysts had forecast earnings of $1.35 for the latest quarter. Caterpillar earnings benefited by 14 cents a share from the sale of the company's remaining stake in a logistics business.
Sales slipped 4% to $12.7 billion.
Caterpillar maintained its earlier forecast that sales for the full year will total about $50 billion, down 9% from 2014. That reflects weaker markets for energy-related engines and equipment and drops in sales of construction equipment in China and railroad locomotives in the U.S.
Caterpillar's order backlog at the end of the first quarter was $16.5 billion, down nearly 15% from a year earlier. The company said its dealers are likely to reduce inventories this year to align them with slower sales.
Demand in the latest quarter was weaker in Europe, Asia and Latin America, Caterpillar said, but increased in North America.
The company faces a persistent slump in mining equipment, sluggishness in construction machinery in much of the world and a more recent slowdown in its most profitable business, engines used for such things as generating power, pushing gas through pipelines, running industrial machines and powering trains and ships.
In the face of those pressures, said Andy Kaplowitz, an analyst at Barclays Bank, "they should not flinch." He urged Caterpillar to stick with its program of repurchasing shares to support the stock price. Caterpillar said it bought back $400 million of common stock in the first quarter and expects to continue buying back shares, though priorities "can change based on business and market conditions."
Mr. Kaplowitz also said he hoped Caterpillar wouldn't shy away from any good acquisition opportunities that may arise. At the same time, he said, Caterpillar probably needs to be more aggressive about scaling back production capacity, especially in mining.
Caterpillar has manufacturing capacity for annual sales of $80 billion to $100 billion, but sales now are running at around $50 billion a year, the analyst said. "At $50 billion a year, they have too much capacity," Mr. Kaplowitz said.
Though Caterpillar wants to be ready with capacity to ramp up production quickly once demand recovers, Mr. Kaplowitz said the company may be overestimating its needs. "The world is going to come back but maybe not in as big a way as Caterpillar believes," he said.
Caterpillar's global workforce at the end of the latest quarter was 129,458, down 1.9% from a year earlier.
Stephen Volkmann, an analyst at Jefferies Group, said Caterpillar had "done a pretty good job" controlling costs and funneling cash to shareholders. He said the company seemed an unlikely target for activist investors seeking major changes and had no unrelated businesses to shed. "There's nothing obvious to spin (off) or sell," Mr. Volkmann said.
Corrections & Amplifications
Caterpillar Inc. reported a profit of $922 million a year ago. An earlier version of this story misstated the figure as billions.
Write to James R. Hagerty at bob.hagerty@wsj.com
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