Caterpillar (NYSE:CAT) is expected to report a sharp drop in first-quarter earnings along with lower revenue than a year earlier, as the manufacturer of construction and mining equipment struggles with the effects of idle equipment in the mining and energy sectors. Analysts’ mean estimate is for adjusted earnings of $0.68 per share, only slightly more than a third of the size of the company’s year-earlier adjusted profit of $1.86 per share, according to Capital IQ. The Street’s average revenue view is $9.45 billion, down 26% from the prior-year period. The analyst views have come down substantially following a warning from the company last month, in which it predicted first-quarter adjusted earnings of $0.65 to $0.70 per share and revenue of $9.3 billion to $9.4 billion.
At the time, the guidance represented a big disappointment from the Street’s then mean estimates for earnings per share of $0.94 and revenue of $10.12 billion. In a research report distributed earlier this week, BMO Capital Markets noted Caterpillar “does not typically provide quarterly guidance but failed to get consensus estimates to move lower after talking down expectations at a number of conferences.” Caterpillar’s troubles span several key segments. In its Resource Industries segment, BMO noted, “management recently mentioned that mining truck sales, which peaked at nearly 1,300 units per year, would be lucky to reach 150 units in 2016.” The firm added: “Given the depressed commodity prices and the large amount of idle mining equipment, it will likely take at least one to two years before mining companies feel the need to ramp production and even longer before they feel the need to order new equipment.” In the energy segment – the company’s largest – there has also been a lot of idle equipment in the field and underutilized capacity, and it “could take two to three years before new equipment will be necessary,” BMO said. “However, Cat has an excellent market position in some very specialized niches that focus on pumping and transporting oil and gas, which are less cyclical and have been relatively less impacted by the huge drop in oil prices,” BMO added. Looking overseas, there are a few spots with growth including in Europe, “but it is minimal and cannot begin to offset the building weakness in North America, the Middle East, and Africa,” BMO said. Caterpillar plans to release the first-quarter results in Friday’s pre-market session.
The stock decreased 0.82% or $0.66 on April 21, hitting $79.73. About 400 shares traded hands. Caterpillar Inc. (NYSE:CAT) has risen 6.92% since September 15, 2015 and is uptrending. It has outperformed by 0.63% the S&P500.
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The companyÂ’s Construction Industries segment offers backhoe, small wheel, skid steer, multi-terrain, compact track, medium and compact wheel, and track-type loaders; mini, wheel, and track excavators; track-type tractors; and select work tools, motor graders, telehandlers, soil compactors, and pipelayers, as well as its related parts for the heavy and general construction, rental, mining and quarry, and aggregates markets. Its Resource Industries segment provides electric rope and hydraulic shovels; draglines; drills; highwall and longwall miners; hard rock vehicles; articulated, large mining, and off-highway trucks; large wheel loaders; wheel tractor scrapers; wheel dozers; machinery components; hard rock continuous mining systems; electronics and control systems; and select work tools for use in mining and quarry applications.
The company’s Energy & Transportation segment offers reciprocating engines, generator sets, marine propulsion systems, gas turbines and turbine-related services, diesel-electric locomotives, and other rail-related products and services. Its Financial Products segment provides retail and wholesale financing for Caterpillar equipment, machinery, and engines; offers property, casualty, life, accident, and health insurance; insurance brokerage services; and purchases short-term trade receivables. The company’s All Other segments remanufactures Cat engines and components, and provides remanufacturing services for other companies; offers business strategy, and development, management, manufacturing, marketing, and support primarily for paving, forestry, industrial, waste, and Cat products. The company was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. The company was founded in 1925 and is headquartered in Peoria, Illinois.
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