UPDATE: Caterpillar 2Q Down 66%; Raises '09 EPS Forecast
21 July 2009 - 11:56PM
Dow Jones News
Caterpillar Inc. (CAT) reported a 66% fall in second-quarter
profit Tuesday, but raised its full-year guidance as aggressive
cost-cutting started to yield results.
The world's largest construction and mining equipment maker
lifted its 2009 forecast to $1.15 to $2.25 a share despite trimming
revenue guidance to $32 billion to $36 billion.
The new guidance compares with its view in April for earnings
$1.25 a share on revenue of $31.5 billion to $38.5 billion.
Caterpillar's shares rose 12.6% to $41.25 in pre-market trading,
as the company's second quarter earnings exceeded Wall Street's
expectations by a wide margin.
"There is still a great deal of economic uncertainty in the
world, but we are seeing signs of stabilization that we hope will
set the foundation for an eventual recovery," said Chairman and
Chief Executive Jim Owens, in a written statement.
Owens said Caterpillar customers are being helped by improved
access to credit markets and $1.7 trillion in government-sponsored
economic stimulus spending on infrastructure construction projects
worldwide.
For the second-quarter, Caterpillar reported income of $371
million, or 60 cents a share, down from $1.1 billion, or $1.74 a
share, a year earlier.
The latest results included $85 million in costs related to job
cuts. Excluding those items, earnings were 72 cents a share. Net
sales decreased 41% to nearly $8 billion. Analysts polled by
Thomson Reuters expected earnings of 22 cents and revenue of $8.86
billion.
Machinery sales tumbled 49% and engine sales slid 32%.
The company said it has shed 17,100 full-time employees since
the end of 2008 and cut more than 17,000 temporary and part-time
workers. The company also imposed rolling layoffs for the remaining
employees and reduced compensation for top executives.
Caterpillar said it hasn't ruled out additional employee layoffs
and warned that its third-quarter sales may be particularly weak as
dealers clear out remaining inventories.
The infrastructure and commodities boom powered Caterpillar for
about five years - helping it more than double its annual revenue
from 2002 to 2007 - but collapsed late last year. Overseas sales
offset a slumping U.S. housing construction market early in 2008,
but late in the year a pullback in commodities prices and global
demand hit results.
Analysts at Bank of America-Merrill Lynch said Monday that
demand for construction machinery made by Caterpillar likely
reached a bottom during the second quarter and will begin a
recovery during the first half of next year.
Analysts had been taking an interest in whether Caterpillar
would cut its 2009 revenue projection again, as a cut would likely
signal a further decline in machinery demand and delay the
anticipated recovery next year.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com