Caterpillar Earnings, Revenue Fall Short; Slashes 2013 Outlook
Caterpillar posted earnings and revenue that missed Wall Street expectations on Monday and cut its full-year outlook for 2013 to reflect a drop in demand for heavy equipment from its mining customers.
After the earnings announcement, the world's largest maker of construction equipment saw its shares fall in pre-market trading before turning higher. (Click here to get the latest quotes for Caterpillar.)
Caterpillar posted quarterly earnings excluding items of $1.31 per share, down from $2.37 per share in the comparable year-ago period. Revenue sank to $13.21 billion from $15.98 billion a year ago.
Analysts had expected Caterpillar to report earnings per share of $1.40 per share on $13.71 billion in revenue, according to a consensus estimate from Thomson Reuters.
(Read More: Big Week of Earnings Ahead)
The company revised its 2013 sales outlook to a range of $57 billion to $61 billion, with profit per share of about $7 at the middle of the sales and revenues outlook range. The company said the cut was necessary "because our expectations for mining have decreased significantly."
"Mining is the big culprit," said Eli Lustrgarten, a research analyst at Longbow Research. "The key question now is not 2013, but 2014—will it be up or down?"
The previous outlook was in the range of $60 billion to $68 billion and earnings of $7 to $9 a share. Street estimates had forecast 2013 sales at around $62 billion.
"Our story right now is mining and it's really soft around the world. I'm hoping we're at a floor in mining," Doug Oberhelman, Caterpillar chairman and CEO, said in an interview with CNBC's "Squawk Box."
(Read More: Earnings Results Are Flashing Warning for Stocks)
"Ore prices are still relatively high. Copper is still relatively high relative to reinvestment. It hasn't dropped through the floor," he added. "[Gold at] $1,400 an ounce is still a pretty good price in the scheme of things long term, and that allows miners to reinvest. They're just slowing down big new investments and big new mine openings."
Caterpillar, which announced earlier this month that it was laying off 460 workers, or about 11 percent of its workforce at an Illinois plant that makes mining equipment, said it had 11,000 fewer people working for it at the end of the first quarter of 2013 than in the year-ago period.
Alexander Blanton, a senior analyst at Clear Harbor Asset Management, said Caterpillar's 9 cent EPS miss was "well within the usual plus-or-minus-10-percent range," typical for the company.
Caterpillar also said on Monday that it would resume a share buyback for the first time in five years.
Larry De Maria, an analyst at William Blair & Co, said Caterpillar's decision to resume the "mothballed" repurchase program was a "positive factor" and probably was contributing to the market's sanguine reaction to the disappointing results and outlook.
Under that plan, which was approved in 2007, Caterpillar could buy back as much as $3.7 billion of its shares before the repurchase authorization expires in December 2015.
CEO Oberhelman said the revised 2013 outlook reflects a sales decline of about 50 percent from 2012 for traditional Cat machines used in mining.
However, Oberhelman suggested optimism, telling CNBC that it was the first time in three years he has seen relative stability around the world, noting inventories in China and the United States have come down significantly.
"We don't want to be overly optimistic but it certainly feels better than the last two springs," he said.
The decline in first-quarter sales was led by a drop in revenue from mining products, which plummeted 23 percent. Sales of construction equipment fell 17 percent and sales of gas and diesel power systems declined 12 percent, the company said.
With mining orders falling because of a price slump in many commodities, including coal, Caterpillar needed a strong rebound from other customers, including residential construction, to offset that weakness.
But that increased demand from builders has not materialized fast enough, in part because some jumped the gun last spring when unseasonably warm weather combined with signs of the nascent economic recovery in the United States prompted many construction equipment customers to place orders for new machines. In the end, the optimism proved to be a little premature, Lustgarten said.
Clear Harbor Asset Management's Blanton said Oberhelman's optimism about China seemed to be borne out by the company's sales there, which were higher in the first quarter of 2013 than they were in the comparable quarter last year.
Caterpillar has warned investors about the weakness in the mining sector several times, most recently earlier this month, when it laid off 11 percent of its workforce at the Decatur, Ill., plant that makes mining equipment.
In January, the company also specifically warned that results for the first quarter would be "well below" those posted during the same period last year as dealers, awash in product, tried to sell off existing inventory before placing new orders.
Robert Wertheimer, a principal at Vertical Research Partners, said the drop in mining orders that Caterpillar was experiencing was "in line" with what its rivals were seeing. "We met with several competitors last week and they all seem to be having similar experiences," Wertheimer said. "It's not a (market) share issue at Caterpillar."
—Reuters contributed to this report.