Caterpillar Inc on Friday chopped its 2016 earnings outlook and posted a lower first-quarter operating profit, reeling from a fall in revenue in its construction, oil and gas and rail business segments. Caterpillar now expects 2016 earnings per share at $3.00, or $3.70 per share excluding restructuring costs. The previous forecast was $3.50 per share, or $4.00 per share, excluding restructuring costs.
The company also trimmed it its 2016 sales outlook range to $40 billion to $42 billion against a previously forecast $40 billion to $44 billion. The outlook revision came despite seeing some signs of improvement in construction equipment in China and recent increases in commodity prices, the company said. "Our sense is that investors will continue to worry that second half of the 2016 forecast are still a stretch as revenue and pricing trends will both need to improve to hit targets," Stephen Volkmann Jefferies analyst said in a note.
The company's shares slipped 0.1 percent to $78.55 in morning trade. Caterpillar said it saw mining customers were focused on reducing capital expenditures and the oil and gas industry's availability of used products impeded the company's sales of new equipment. "While first-quarter results were about as we expected, sales and profit were well below the first quarter of 2015," CEO Doug Oberhelman said in a statement. For the three-month period ended March 2016 the company's dealers said global retail machinery sales were down 13 percent, compared with he previous year.
PROFIT SLUMPS The world's largest heavy machinery manufacturer reported a operating income of $494 million, or 67 cents per share in the first quarter, down from a revised $1.70 billion, or $2.07 a share, a year ago. Analysts had expected earnings per share of 68 cents. Including restructuring costs, Caterpillar earned 46 cents per share, compared with a revised $2.03 a year earlier. Revenue fell to $9.46 billion from $12.7 billion a year ago.
Earlier this week Moody's Investor Service revised Caterpillar's credit outlook to negative which means it could lower its current credit rating in the near-term. Caterpillar said while its cash flow has decreased from $1.04 billion to $218 million in the first quarter of 2016 due to lower profits, it is focused on maintaining its credit rating and dividend.
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