Caterpillar looks to 2016 for earnings recovery

Banking on a "slow but steady" recovery in the U.S. and a potential revival of the European economy, the chief of Caterpillar believes that 2016 will be a better year.

"We can see the catalyst of growth with the slow but steady U.S. recovery. Europe's day is coming. Believe it or not, it will recover at some point," CEO and Chairman Doug Oberhelman told CNBC's "Managing Asia."

One promising factor that could end the slowdown in the euro zone is the euro's rapid depreciation, sparked by the launch of the European Central Bank's (ECB) large-scale government bond purchases in January. Coupled with speculation of a mid-year rate hike in the U.S., the ECB's easing has seen the common currency fall 10 percent against the greenback year-to-date.

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"The weaker euro could help to stimulate Germany, especially its economic base and exports, which could spill into the rest of Europe. On top of that, the ECB's quantitative easing could stimulate economic growth going into 2016," the 62-year-old said.

Besides that, accommodative monetary policy around the world and a dramatic decline in energy prices remain supportive of global growth. "With all the stars aligning, I think we are closer to the end now," Oberhelman added.

The CAT logo is displayed on Caterpillar construction equipment.
Justin Sullivan | Getty Images
The CAT logo is displayed on Caterpillar construction equipment.

Headwinds in 2015

Cheaper oil, however, is a double-edged sword for the world's biggest construction and mining equipment giant. A near 50 percent plunge in the price of crude oil, due to a host of concerns including weak demand and booming U.S. oil production, has lowered demand from energy companies.

For 2015, Oberhelman expects the performance of Caterpillar to remain soft amid "a very volatile and dangerous world." Earnings will be $4.75 a share excluding restructuring costs, while revenue is seen falling to about $50 billion, according to the Peoria, Illinois-based company. The cutback in sales and revenue outlook has taken a toll on its New York-listed stock, which lost 12.3 percent year-to-date.

"2015 will see headwinds and when we talk about revenue being down by about $5 billion, about half of that is in [the] oil and gas segment," he said.

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The ongoing rout in the prices of copper, coal and iron ore didn't help either, but Oberhelman sounded a slightly more optimistic view on the mining industry.

"There's no good news [from our big mining customers], but when there's no good news, it's usually a signal that maybe we are nearing the bottom. I think things are stabilizing at a very low level," said the man who has been at the helm of Caterpillar since 2010.

Global growth will need to hit a "magic number of about 3 percent" to kickstart a recovery in the troubled mining sector. "With 2.5-3 percent growth in the world, even with 7 percent in China, it doesn't really [constitute] demand for things. The magic number is really about 3-3.5 percent. When that happens, things will start to change," the CEO said.

Caterpillar is also on guard against lingering geopolitical uncertainties.

"Our walls are pretty tall, wide and hard but I worry about the thing which we never saw coming… like the fallout of some geopolitical event. It seems like there is so much political instability that could spill over into [the] economic and financial [realms]," Oberhelman said.

— Reporting by Christine Tan | Written by See Kit Tang