CAT Caterpillar Inc

By Chelsey Dulaney 

Caterpillar Inc. on Thursday gave a strong profit outlook for 2016, even as the company cut its sales guidance as it struggles with weak demand for its equipment used in mining and oil drilling.

The Peoria, Ill., maker of heavy equipment and engines also reported better-than-expected adjusted earnings for its fourth quarter, though its revenue missed expectations.

Shares rose 6.5% to $62.10 a share in premarket trading.

Caterpillar said it now expects its revenue to fall by about 10% to a range of $40 billion to $44 billion. In October, the company had forecast a 5% sales decline for 2016, with lower sales of mining equipment accounting for two-thirds of the damage. The decline would mark its fourth straight year of lower sales, a record for the company.

The company, which is already planning to cut thousands of jobs in the coming years, said it will book $400 million in restructuring charges in 2016 to lower its cost structure.

Still, Caterpillar forecast earnings of $4 a share for 2016 excluding those restructuring charges. Analysts polled by Thomson Reuters had forecast $3.48 a share in adjusted earnings. Lower pension and post-employment benefit costs, due to an accounting change, are expected to boost profit.

Chief Executive Doug Oberhelman, in prepared remarks, gave a tempered take on the company's outlook, saying it "reflects struggling oil and other commodity markets, and continued economic weakness in developing countries....While the U.S. and European economies are showing signs of stability, the global economy remains under pressure."

Caterpillar is facing tough conditions across a number of its markets. Weakening economic growth in the U.S. is driving down construction activity, while lower gas and oil prices have pulled down sales of Caterpillar machinery and engines used at frack well sites in North America.

A dismal economy in Brazil and weaker economic growth in China have choked sales in two of Caterpillar's key overseas markets.

For the fourth quarter ended Dec. 31, Caterpillar swung to a loss of $87 million, or 15 cents a share, compared with a prior-year profit of $757 million, or $1.23 a share.

Excluding restructuring costs, which totaled about 89 cents a share, the company reported earnings of 74 cents a share. Analysts polled by Thomson Reuters had forecast 69 cents a share in earnings.

Revenue, including revenue from financing, tumbled 23% to $11.03 billion. Analysts had forecast $11.43 billion in revenue.

Caterpillar said sales in the quarter declined across all of its regions and segments. North American sales fell 26% amid declines in energy & transportation. In its Europe, Africa and Middle East division, sales fell 20%, hurt in part by currency impacts. Latin America posted the largest sales decline, with weakness in Brazil contributing to a 36% year-over-year decline for the region.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

(END) Dow Jones Newswires

January 28, 2016 08:15 ET (13:15 GMT)

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