* Quarterly profit misses Wall Street view by 9 cents/share
* Shares rise on buyback, CEO's upbeat comments
* Plans to buy back $1 billion in shares this year
* 1st-quarter sales down 17 pct to $13.2 billion
By James B. Kelleher
CHICAGO, April 22 Caterpillar Inc posted
disappointing quarterly results and cut its 2013 profit forecast
on Monday to reflect a drop in demand for heavy equipment from
its mining customers.
But the world's largest maker of construction and mining
equipment said it believed the pullback in spending by miners
was temporary, and its shares rose on news it was reviving a
buyback program and would purchase $1 billion in stock this
Caterpillar, whose shares have been weighed down for months
by concern about the mining sector, is encouraged by "stability"
in the construction markets in both the United States and China,
said Chairman and Chief Executive Doug Oberhelman.
"We have been watching relatively flat but slightly
increasing sales to users for a number of months," he told
analysts on a conference call.
Mining equipment is Caterpillar's most profitable product
category. Sales to the sector have been hurt in recent quarters
because miners, facing investor backlash over unpopular
takeovers, budget overruns and falling metal prices, have
slashed capital spending, slowing development on some projects
and shelving others entirely.
"Investors knew it would be bad, but wanted some
quantification from the company," said Adam Fleck, an analyst At
Caterpillar's revised outlook reflects an expected 50
percent decline in sales of its traditional mining trucks and
loaders and a 15 percent decline in sales of the draglines made
by Bucyrus, the mining equipment company it purchased in 2010.
The delayed and canceled sales from mining companies are
hardly a surprise. Caterpillar has warned investors about the
weakness in the sector several times, most recently this month,
when it laid off 11 percent of its workforce at the Decatur,
Illinois, plant that makes mining equipment.
In January, the company also specifically warned that
results for the first quarter would be "well below" those posted
during the same period last year as dealers, awash in product,
tried to sell off existing inventory before placing new orders.
Robert Wertheimer, a principal at Vertical Research
Partners, said the drop in mining orders that Caterpillar was
experiencing was "in line" with what rivals were seeing. "We met
with several competitors last week and they all seem to be
having similar experiences," he said. "It's not a (market) share
issue at Caterpillar."
The Peoria, Illinois-based company said it now expects to
report a 2013 profit of $7 per share on sales of $57 billion to
$61 billion. That was down from a previously estimated profit of
between $7 and $9 a share on sales of $60 billion to $68
The news came as the company reported a weaker-than-expected
Caterpillar said it earned a profit of $880 million, or
$1.31 a share, down from $1.59 billion, or $2.37 a share, in the
Analysts had expected the company to report a profit of
$1.40 per share. Sales during the period fell 17 percent to
Alexander Blanton, a senior analyst at Clear Harbor Asset
Management, said Caterpillar's 9-cent EPS miss was "well within
the usual plus or minus 10 percent range," typical for the
Caterpillar also said on Monday that it would resume a share
buyback for the first time in five years.
Larry De Maria, an analyst at William Blair & Co, said
Caterpillar's decision to resume the "mothballed" repurchase
program was a "positive factor" and probably was contributing to
the market's sanguine reaction to the disappointing results and
Under that plan, which was approved in 2007, Caterpillar
could buy back as much as $3.7 billion of its shares before the
repurchase authorization expires in December 2015. The company
said it would buy $1 billion back in 2013.
Oberhelman told analysts during the call that for the first
time in three years the company was seeing relative stability
around the world.
"We don't want to be overly optimistic but it certainly
feels better than the last two springs," he said.
The decline in first-quarter sales was led by a drop in
revenue from mining products, which plummeted 23 percent. Sales
of construction equipment fell 17 percent and sales of gas and
diesel power systems declined 12 percent, the company said.
With mining orders falling, Caterpillar needed a strong
rebound from other customers, including residential
construction, to offset that weakness.
But that increased demand from builders has not materialized
fast enough, in part because some jumped the gun last spring
when unseasonably warm weather, combined with signs of the
nascent economic recovery in the United States, prompted many
construction equipment customers to place orders for new
In the end, the optimism proved to be a little premature,
said Eli Lustgarten, an analyst at Longbow Securities.
Clear Harbor Asset Management's Blanton said Oberhelman's
optimism about China seemed to be borne out by the company's
sales there, which were higher in the first quarter of 2013 than
they were in the comparable quarter last year.
Caterpillar shares were up 2.5 percent at $82.42 on Monday
afternoon, after dipping 1.2 percent to $79.50 in the morning.
The shares have a 52-week high of $108.79 and a low of $78.25.