Caterpillar forecasts slowest sales growth in four years

Caterpillar Inc., the world’s largest maker of construction and mining equipment, forecast sales growth for 2013 that is the slowest in four years as the global economy decelerates.

Sales next year will be from 5 percent below to 5 percent more than 2012 results, the Peoria, Illinois-based company said today in a statement. That compares with an average increase of 5.1 percent of 17 estimates compiled by Bloomberg. Revenue year- over-year grew 31 percent in 2010, 41 percent in 2011 and an estimated 13 percent this year.

“The biggest concern is the declining backlog, which would imply a more challenging year next year, especially for mining, and whether or not North American construction will re-accelerate,” Larry De Maria, a New York-based analyst for William Blair & Co. who has a buy rating on the shares, said today in a telephone interview. “Caterpillar’s business is very economically sensitive. Due to the softening of the global economy and increasing uncertainty, order rates have declined.”

The order backlog fell 18 percent to $23.1 billion at the end of the third quarter from three months earlier with the most significant decrease in the resource-industries segment, which includes mining, the company said. Production across much of the company has been reduced with temporary shutdowns and layoffs as it works through excess inventory, Caterpillar said in the statement.

Growth Decelerates

Chairman and Chief Executive Officer Doug Oberhelman has invested in Caterpillar’s factories and announced about $10.3 billion in deals since becoming CEO in July 2010. His expansion plans are facing hurdles as the European debt crisis persists and economic growth decelerates in emerging markets from China to Brazil.

The results were released before the start of regular trading in New York, where Caterpillar fell 1.3 percent to $82.80 at 8:17 a.m. The shares declined 7.4 percent this year before today.

Third-quarter net income increased 49 percent to $1.7 billion, or $2.54 a share, from $1.14 billion, or $1.71, a year earlier, the company said in the statement. Sales climbed 4.6 percent to $16.4 billion from $15.7 billion. The earnings include a pretax gain of $273 million from the sale of a majority interest in Caterpillar’s third party logistics business.

Caterpillar’s 2013 forecast was mostly “in-line” with analysts’ estimates, De Maria said.

2012 Profit

The company said today that profit this year will be $9 to $9.25 a share on sales of about $66 billion, compared with a July forecast for per-share earnings of about $9.60 on sales of $68 billion to $70 billion.

Last month, Oberhelman cut Caterpillar’s profit target for 2015 to $12 to $18 a share, from an earlier projection of $15 to $20, and said revenue this year may be around $2 billion lower than forecast.

Caterpillar said last week its global retail machine sales growth reported by dealers slowed to 6 percent in the third quarter on declines in Latin America and the region that includes Europe, the Middle East and Africa. The growth rate also slowed in the Asia-Pacific region and North America. In comparison, retail-machine sales grew 13 percent for the three months through August and 14 percent for the three months through July.

China’s growth rate dipped to 7.4 percent in the third quarter, the lowest since 2009. The world economy will expand 3.3 percent this year, the slowest pace since the 2009 recession, and 3.6 percent next year, the International Monetary Fund said Oct. 9. Bank of Israel Governor Stanley Fischer said Oct. 15 that the world is “awfully close” to a recession.

While not predicting a recession, Caterpillar said today it’s “not expecting improvement in overall economic growth until the second half of 2013” and forecasts 2013 economic growth of about 2.7 percent, compared with the 2.5 percent it projects for this year.

Bloomberg News

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome