Caterpillar earnings beat, but revenue is light

“Cost management, restructuring actions and operational execution are helping the company while sales and revenues remain under pressure from weak commodity prices and slowing economic growth in developing countries…Our outlook reflects struggling oil and other commodity markets, and continued economic weakness in developing countries”.

Caterpillar Inc. (NYSE:CAT)’s share price shot up 4.5% during trading on Thursday after the company announced better than expected quarterly earnings, Market Beat.com reports. Excluding restructuring costs, Caterpillar’s 2016 guidance stands at $4.00 per share. Capital One National Association’s holdings in Caterpillar were worth $619,000 as of its most recent filing with the SEC.

The company noted that restructuring costs amounted to $682 million for the quarter.

Total sales and revenues for the quarter were $11.03 billion, down from $14.24 billion in the prior year.

The company lost $87 million, or 15 cents per share, after reporting a profit in the same period a year earlier.

Excluding restructuring costs, Caterpillar earned 74 cents per share, compared with the average analyst estimate of 69 cents per share. Analysts had forecast $11.43 billion in revenue. De Maria believes this decline stems from “general weakness and other factors such as low commodity prices”, as well as “the emissions changeover”.

Caterpillar witnessed revenue decline across all regions.

Peoria, Illinois-based Caterpillar expects another 10% decline in revenue in 2016 to around $42 billion, but executives still can’t predict a bottom for the industry.

Caterpillar is facing tough conditions across a number of its markets. In North America, Caterpillar witnessed a 26% decline in sales due to lower end-user demand for Energy & Transportation applications and unfavorable changes in dealer inventories, mostly in Construction Industries. In its Europe, Africa and Middle East division, sales fell 20%, hurt in part by currency impacts.

For the entire year of 2015, sales and revenues were just over $47-billion a year, which is down from $55.1-Billion in 2014.

The two most significant reasons for the decline were weakening economic growth and substantially lower commodity prices.

Profit per share was cut almost in half, falling 41 percent to $3.50 from $5.88 in 2014.

The decrease from last October’s preliminary outlook is largely a result of continued declines in commodity prices and economic weakness in developing countries. Per the company, improving labor market conditions and relatively stable economic growth in the USA should help support the wider economy and construction.