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Caterpillar Bulldozed By Weak Earnings, Poor Outlook

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Doug Oberhelman, chairman and CEO of Caterpillar Inc. (Image credit: AFP/Getty Images via @daylife)

In Caterpillar 's third quarter earnings report CEO Doug Oberhelman called 2013 'a painful year.' Shareholders agree.


The manufacturer reported profits of $946 million, down 44% from the same period last year. Per share earnings were $1.45, far below analysts' $1.68 estimate, according to Fact Set. Sales were down 18.4% to $13.4 billion. Shares of Caterpillar were down 5.6% to $84.20 at market open.


To make matters worse, the company revised full-year sales estimates to $55 billion with profit of $5.50 per share, down from $56 to $58 billion with profit of around $6.50 per share. Last year, the manufacturer brought in $65.8 billion in sales, with profits of $8.90 per share.


Caterpillar credits the disappointing performance, to a combination of less mining and declining demand for new equipment. 'Unfortunately,' said CEO Doug Oberhelman, 'order rates have not picked up much despite continuing strong commodity production. That has caused us to ratchet down our sales and revenues outlook as we have moved through 2013.'


To cut costs and make up for lost revenue, the company cut more than 13,000 works, furloughed thousands of others and temporarily shut down several plants. As a result Caterpillar has cut about $700 million in costs and cut $400 million in capital expenditures. Oberhelman called 2013, 'a painful year.' On a more positive note, the company noted 30% growth in China and strong cash flow.


In July, however, hedge fund manager James Chanos announced that he is shorting Caterpillar. He told an audience at the CNBC/Institutional Investor Delivering Alpha conference that construction and mining equipment maker had benefited from building in China, but Chanos believe the trend is coming to an end.


As of market close Tuesday, Caterpillar shares are up 6.7% year-over-year. Competitor Deere & Co are down .6%.


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