Caterpillar Inc.'s (CAT) second-quarter profit fell 66% as the
heavy-machinery maker posted slumping machinery and engine sales as
job-cut charges further reduced earnings.
Still, Caterpillar's shares rose 8.6% to $39.72 in premarket
trading, as the profit beat Wall Street's expectations and the
company boosted full-year earnings expectations.
"There is still a great deal of economic uncertainty in the
world, but we are seeing signs of stabilization that we hope will
set the foundation for an eventual recovery," said Chairman and
Chief Executive Jim Owens, who noted improved credit markets and
stimulus spending, particularly in China, as positive trends.
The company tightened its sales view, shaving off the top figure
by $2.6 billion and confirming Wall Street's concerns, and provided
a broader earnings target. It noted sales this year have been hurt
by weak end-user demand and a significant reduction in dealer
inventory.
Caterpillar sees per-share earnings of $1.15 to $2.25, excluding
redundancy costs, on revenue of $32 billion to $36 billion,
compared with its April view of $1.25 on revenue of $31.5 billion
to $38.5 billion.
The infrastructure and commodities boom powered Caterpillar for
about five years - helping it more than double its annual revenue
from 2002 to 2007 - but collapsed late last year. Overseas sales
offset a slumping U.S. housing construction market early in 2008,
but late in the year a pullback in commodities prices and global
demand hit results.
For its part, the company has said it will shed about 25,000
jobs - about 23% of its work force - in addition to other cost
cutting moves such as pay cuts and plant closings.
Analysts at Bank of America-Merrill Lynch said Monday that
demand for construction machinery made by Caterpillar likely
reached a bottom during the second quarter and will begin a
recovery during the first half of next year. Analysts had been
taking an interest in whether Caterpillar would cut its 2009
revenue projection again, as a cut would likely signal a further
decline in machinery demand and delay the anticipated recovery next
year.
The company posted income of $371 million, or 60 cents a share,
down from $1.1 billion, or $1.74 a share, a year earlier. The
latest results included $85 million in costs related to job cuts.
Excluding those items, earnings were 72 cents a share.
Net sales decreased 41% to nearly $8 billion.
Analysts polled by Thomson Reuters expected earnings of 22 cents
and revenue of $8.86 billion.
Machinery sales tumbled 49% and engine sales slid 32%.
In April, Fitch Ratings cut its credit rating on Caterpillar and
its financial-services unit by one notch, citing pressure on
business this year and possibly next.
-By Kerry Grace Benn and John Kell, Dow Jones Newswires;
212-416-2353; kerry.benn@dowjones.com