Caterpillar Again Cuts Outlook as Second-Quarter Earnings Lag Forecasts

The industrial equipment maker says layoffs will take its restructuring bill for the year to $700 million.
By Laura Board ,

Construction and mining equipment maker Caterpillar  (CAT) - Get Report on Tuesday posted second-quarter earnings below expectations as it once again lowered its outlook for the full year amid a continued downturn among its industrial clients.

In its statement on Tuesday, Caterpillar said full-year restructuring costs will be about $700 million, up from the $550 million previously forecast, as the company makes new layoffs. It didn't put a figure on "additional workforce reductions" it expects in the second half. (In the previous quarter Caterpillar had lifted its forecast for its 2016 restructuring bill to $550 million from $150 million).

Second-quarter earnings per share fell to 93 cents from $1.31 a year earlier and below consensus expectations for 96 cents.

Revenue fell 16% to $10.3 billion year on year, slightly better than the $10.1 billion predicted.

The Peoria, Ill., company has been battered by declining spending among its construction, oil and gas, mining and rail-industry clients, which it has sought to offset by cutting costs and curbing production. It said on Tuesday that Brexit and the political turmoil in Turkey have added to global economic risks.

"Despite a solid second quarter, we're cautious as we enter the second half of the year. We're not expecting an upturn in important industries like mining, oil and gas and rail to happen this year," said Chairman and CEO Doug Oberhelman.

On a conference call Tuesday, Caterpillar told investors that it had essentially hit rock bottom, according to TheStreet's founder Jim Cramer.

"If things get better and I think they will ... particularly in oil in gas then Caterpillar is going to be a buy," Cramer said Wednesday.

"The mining and weakness in construction for Catterpiller did not pan out," Cramer added. "It's really a case of the shorts making a bet and the bets not paying off and therefore having to come in and cover their bets."

Caterpillar said 2016 revenue will be between $40 billion to $40.5 billion, and the profit outlook at the midpoint of the sales and revenue range is about $2.75 a share, or about $3.55 a share excluding restructuring costs.

That compares with its most recent forecast for $40 billion to $42 billion revenue, and a profit outlook based on the mid-point of its revenue range of $3 a share, or $3.70 before restructuring costs.

The stock closed Monday at $78.69. It has risen just under 8% in the past year. The stock fell 0.4% in premarket trading.

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