Caterpillar Says Strong Dollar Adding to Its Woes -- WSJ
January 27 2017 - 3:02AM
Dow Jones News
By Andrew Tangel
Caterpillar Inc. trimmed its sales outlook on Thursday and said
revenue slid in 2016 for the fourth year in a row, providing
evidence that a prolonged slump in mining and construction is still
unfolding.
The Peoria, Ill.-based heavy-equipment giant said the recent
strengthening of the U.S. dollar could drag down sales this year,
after revenue fell 18% in 2016 to $38.5 billion.
Caterpillar's losses deepened in the fourth quarter. The company
reported a loss of $1.2 billion, or $2 a share, compared with a
year-earlier loss of $94 million, or 16 cents a share. Revenue fell
to $9.6 billion from $11 billion.
"We continue to execute in a challenging economic environment
and are focused on improving operating margins, profitability and
shareholder returns," Caterpillar Chief Executive Jim Umpleby said.
"While we see signs of positive activity in some of our key end
markets, the overall economic environment remains challenging."
The manufacturer's troubles were compounded by
higher-than-expected restructuring costs, losses related to pension
and retirement benefits and a $595 million impairment tied to its
2011 billion acquisition of mining-equipment maker Bucyrus
International Inc.
Excluding those items, the company said it earned 83 cents a
share, flat with a year ago and above the 66 cents expected by
analysts polled by Thomson Reuters. Analysts had expected revenue
of $9.8 billion.
Caterpillar's shares closed down about 1% to $97.22 in regular
trading.
The dollar's rise since President Donald Trump's election in
November could spell trouble for manufacturers such as Caterpillar
that depend on exports. A stronger dollar makes American products
more expensive overseas, and foreign sales less valuable.
Caterpillar said the dollar's climb is one reason it lowered its
revenue outlook for the year to a range of between $36 billion and
$39 billion.
The midpoint would be lower than the approximately $38 billion
it telegraphed in December, and potentially mark a fifth-straight
year of declining revenue for the world's largest mining and
construction equipment maker.
Caterpillar said it expects earnings per-share of about $2.30
this year, or $2.90 excluding estimated restructuring costs of
about $500 million.
Caterpillar's restructuring also weighed on its global
workforce, which it has cut recently. By the end of 2016, the
company counted 106,400 employees, down from 118,700 a year ago.
Most of the reductions were made in the U.S.
Caterpillar executives were optimistic about Mr. Trump's
proposed boost to infrastructure spending, which could lead to
increased sales of the company's construction equipment.
They also expressed support for the administration's aims of
reducing corporate taxes and regulations and of securing fair trade
deals.
"As we look at what's happening in the conversation in
Washington, both within the administration and Congress, there's a
number of things that we're very encouraged by," Mr. Umpleby
said.
Joshua Jamerson contributed to this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
January 27, 2017 02:47 ET (07:47 GMT)
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