Caterpillar to Lay Off; Profit Misses Estimates
Caterpillar missed market expectations by 2 cents Tuesday, reporting earnings per share of $1.39 for the third quarter, but it said it maintains its full-year outlook for earnings of $6 per share while laying off workers.
But the company, the world's largest maker of earth-moving equipment, painted a bleak picture of the much of the developed world. It called conditions in North America "recessionary" and predicted that Europe would be in recession by year end.
And the company's chief executive of Caterpillar said Tuesday the company had laid off an unspecified number of workers in the United States, England and France as it tries to adjust to what he called "recessionary conditions" in some of its markets.
During a conference call with analysts to discuss the construction and mining-equipment maker's earnings, Jim Owens said workers in Sanford, N.C.; Mossville, Ill.; Leicester, England and Grenoble, France, had been affected by the cuts.
Third-quarter revenue was $12.981 billion, 13 percent higher than third quarter 2007 revenue of $11.442 billion, Caterpillar said in a statement.
"Demand in emerging markets and commodity prices at levels that encourage investment in mining and energy have helped offset negative economic conditions in much of the developed world," Chairman and Chief Executive Officer Jim Owens said in a statement.
Caterpillar acknowledged that a weakening world economy could continue to push commodity prices down and prompt mining and energy companies to reduce investment.
But it expressed optimism that much of the developing world would continue to grow as commodity prices stay above levels that encourage investment and said that it does not expect "a worldwide economic collapse as occurred in the early 1980s."
Total net profit of fell 6 percent to $868 million from the third quarter of 2007, because of higher manufacturing costs, primarily for materials.
"We expected that material and freight costs would increase in the second half of 2008, and they did in the third quarter. Higher material costs, especially for steel, were the most significant headwind we faced in the quarter," Owens said.
Eli Lustgarten, an analyst at Longbow Securities, said that at $40 a share -- close to its current stock price -- the market was expecting 2009 earnings of $3 a share, half this year's projected total.
"A few pennies light ... but no disaster," Lustgarten said ."They're saying relatively flat revenue next year, which does not necessarily mean up earnings. But we're not talking a catastrophic decline."
-- Reuters contributed to this report