By James B. Kelleher
Jan 27 Caterpillar Inc posted a
stronger-than-expected quarterly profit on Monday as cost cuts
and an uptick in demand for its building equipment offset
continued weak sales to the mining industry.
The results, together with a better-than-estimated
preliminary profit forecast for 2014 and a new $10 billion share
repurchase plan, sent Caterpillar's stock up as much as 7
percent in early trading on the New York Stock Exchange.
"We expected there would be a decline in mining sales in
2013, and it turned out to be worse than we anticipated," Doug
Oberhelman, the chairman and chief executive officer, said in a
"As a result, we took substantial actions to reduce costs
which helped mitigate the impact on profit."
Caterpillar, which cut nearly 10,000 jobs globally last
year, said it was beginning to see "some signs of improvement in
the world economy, which should be positive for sales" down the
It expects construction-equipment sales, which jumped 20
percent in the most recent quarter, to rise another 5 percent in
the coming year.
"This is probably the quarter a lot of investors were
looking for," said Adam Fleck, an analyst at Morningstar.
Caterpillar's cautious optimism extended to the emerging
markets, a source of investors' concern in recent weeks. The
company forecast economic growth picking up modestly in the
world's developing economies in 2014.
Caterpillar's outlook wasn't entirely rosy. The company
expects mining customers, which have slashed orders in recent
quarters, to continue to reduce their investments in new
equipment this year.
The mining sector had been one of the company's most
profitable in recent years and Caterpillar doubled down on the
business through acquisitions. But over the past year and a
half, mining customers faced investor backlash over unpopular
takeovers, budget overruns and falling metal prices, and
postponed or canceled new equipment orders.
Oberhelman said on Monday that Caterpillar expects those
headwinds to continue in 2014, with mining equipment sales
declining another 10 percent. He said that the company would
"take additional actions" during the year to cut costs. He
characterized the moves as "tough decisions necessary to better
position us down the road when economic conditions improve and
our sales rebound."
Brian Langenberg, an analyst with independent research firm
Langenberg & Co, said Caterpillar's latest results suggested the
"the worst is over." Even the continued challenges in the mining
sector will get "less bad" in 2014, Langenberg said.
The Peoria, Illinois-based company, which also makes
locomotives and diesel and turbine engines, reported
fourth-quarter profit of $1 billion, or $1.54 a share, up from
$697 million, or $1.04 a share, in the same period of 2012.
Revenue fell 10 percent to $14.4 billion.
Analysts, on average, expected Caterpillar to post a profit
of $1.28 a share on sales of $13.6 billion, according to Thomson
(Graphic on Caterpillar earnings:
Caterpillar provided a preliminary 2014 profit outlook that
was slightly better than investors had expected. The company
forecast earnings of $5.85 a share, before restructuring
costs, 7 cents a share more than analysts estimated going into
Monday's earnings report.
Caterpillar shares, which underperformed the S&P 500
during the fourth quarter of 2013, were up 5.7 percent at $91.07
on the New York Stock Exchange after trading as high as $92.31.
Caterpillar, which just wrapped up a $7.5 billion share
buyback, said on Monday its board had authorized another $10
billion in stock repurchases through Dec. 31, 2018.
At the end of 2013, Caterpillar employed 118,500 people