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Caterpillar Cuts Forecast

Caterpillar Cuts Forecast

April 22, 2016
With commodity indexes slumping in January to all-time lows, customers from Australia to Brazil have trimmed costs to remain profitable, denting machinery orders.

Caterpillar Inc., (IW 1000/71) the largest manufacturer of mining and construction equipment, lowered its 2016 earnings and sales forecasts as a slump in demand persists after a meltdown in commodities prices.

Revenue will be $40 billion to $42 billion this year, the Peoria, Ill.-based company said on April 22. In January, Caterpillar forecast full-year earnings of $4 a share and $40 billion to $44 billion of revenue. Per-share earnings will be $3.70, down from a previous forecast of $4.

Caterpillar CEO Doug Oberhelman is shutting factories and cutting 10,000 workers through 2018 in response to a global mining and energy rout.

With commodity indexes slumping in January to all-time lows, customers from Australia to Brazil have trimmed costs to remain profitable, denting machinery orders. While commodity markets are rebounding as supply overhangs start to subside, demand for the company’s signature yellow diggers and trucks has yet to revive.

Commodity producers, who use Caterpillar machinery to dig up and transport materials as well as power their equipment, have slashed capital spending. BHP Billiton Ltd., the world’s biggest mining company, announced last month that it would cut spending at a Canadian potash mine.

In March, the company issued the first quarterly earnings guidance in its history, announcing that it will report 65 cents to 70 cents per share of profit in the first quarter, without changing its full-year outlook.

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