NEW YORK (TheStreet) -- Caterpillar (CAT) - Get Report stock is down by 1.03% to $65.12 in mid-morning trading on Friday, after the company lowered its 2015 revenue guidance and announced a cost reducing plan that includes about 5,000 job cuts on Thursday.
The construction and mining equipment manufacturer lowered this year's revenue outlook to $48 billion, from $49 billion, and estimated revenue in 2016 will decline 5% year-over-year.
Caterpillar's cost reducing plan will lower annual costs by about $1.5 billion by cutting 4,000 to 5,000 jobs by the end of 2016 and a another potential 10,000 through 2018, as well as closing about 20 facilities.
The move, which was driven by a downturn in the commodities market, led William Blair to downgrade Caterpillar to "market perform" from "outperform" this morning.
The firm also lowered its price target to $60 from $90 and its 2015 earnings estimate to $4.75 per share, from $5 due to a weakness in emerging markets, the fall in commodity prices and the concerns over the construction sector.
Separately, TheStreet Ratings team rates CATERPILLAR INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate CATERPILLAR INC (CAT) a HOLD. The primary factors that have impacted our rating are mixed — some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 35.04% is the gross profit margin for CATERPILLAR INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.76% trails the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Machinery industry and the overall market on the basis of return on equity, CATERPILLAR INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Net operating cash flow has declined marginally to $2,088.00 million or 6.66% when compared to the same quarter last year. Despite a decrease in cash flow of 6.66%, CATERPILLAR INC is in line with the industry average cash flow growth rate of -13.94%.
- The debt-to-equity ratio is very high at 2.24 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, CAT maintains a poor quick ratio of 0.95, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: CAT