Caterpillar Raises Forecast, But Falling Sales Clip Stock
(AP Photo/Seth Perlman)Caterpillar chief Doug Oberhelman sounded an upbeat tone in the heavy equipment company's second-quarter earnings release, but a third straight quarter of falling sales left investors less than thrilled Thursday morning.
'We're pleased with our second-quarter results,' Oberhelman said in earnings report, 'particularly the improvement in profit' as Caterpillar booked earnings per share of $1.57, up from $1.45 a year earlier. Excluding a restructuring hit, profit was $1.69 per share.
The sales picture was cloudy though, with overall revenue down 3.2% to $14.2 billion. Caterpillar attributed the decline to weakness in the resources business, where sales dropped 29% on lower demand for mining equipment. The construction side of things was in better shape, with sales up 11% and a sharp 83% increase in profit.
The 3% decline in Q2 sales comes on the heels of a 12% decline in the first quarter and a 16% drop in the final quarter of 2013. Globally, Caterpillar said declines in its Asia/Pacific and Latin America segments were offset to some degree by gains in North America. The mining weakness cut Asia/Pacific sales by 14% from a year ago, largely owing to slowing demand in China, while Latin America sales dropped 16% because of the mining hit. North American sales, driven largely by better U.S. demand for the company's construction equipment rose 6%.
'We understand that we don't control the economy or the timing of a turnaround in mining,' Oberhelman added, pointing to the company's focus on cost control and stock buybacks - $2.5 billion planned in the third quarter - in order to manage through the current period of challenging global growth.
Caterpillar's outlook remains upbeat on earnings, with EPS now expected to hit $5.75 in 2014, up from a previous call for $5.55. Excluding about $400 million in restructuring costs, earnings are expected to hit $6.20 per share, from $6.10. Sales are still expected to be mostly flat from 2013, somewhere in the $54 billion to $56 billion range.
Oberhelman touted the improvement in the company's bottom line despite the lackluster economic growth around the world, but another quarter of falling sales hit the stock price Thursday morning.
Shares of Caterpillar, which were down 2.8% at $105.40 at the opening bell, have been a winner in 2014 with a 19.3% rise. That's good for third-best on the Dow Jones industrial average behind Microsoft and leader Intel .
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