Caterpillar Popping On Better-Than-Expected Profit, Outlook

Jan 27 2014, 9:21am CST | by

Aggressive cost cutting really can make all the difference. That’s the lesson from Caterpillar's fourth quarter earnings report, out Monday morning. The world’s largest maker of construction and mining equipment saw a 10% drop in fourth quarter revenue, but thanks to job cuts and other cost savings measures, Caterpillar beat the Street and grew its profit by nearly 50%. As a result, its shares have popped more than 6% in early Monday trading.

Caterpillar reported $14.4 billion in fourth quarter 2013 revenue, a 10% decline over the fourth quarter of 2012 but beating the Street consensus of $13.5 billion. Profit, however, increased 44% to $1 billion for the quarter, resulting in earnings of $1.54 per share, a 48% increase over the $1.04 per share for the fourth quarter of 2012 and coming in well above analyst estimates of $1.29 per share.

On a full-year basis, Caterpillar saw $55.7 billion in revenue, a 16% drop over 2012′s revenue that was largely due to a decline in sales for new mining machines. The company reported $3.8 billion in full-year profit, resulting in earnings of $5.75 per share, a 32% drop over earnings per share in 2012.

Calling 2013 an “incredibly tough year,” Caterpillar chairman and CEO Doug Oberhelman said Monday morning that turning a profit in the fourth quarter was not easy.

“In such a challenging environment, I am proud of the way our employees came together in 2013.  Despite a sales and revenues decline of about $10 billion, we set a record for operating cash flow, strengthened our balance sheet and improved our overall market position for machines, ” he said in a statement.  ”Cost flexibility is critical to our strategy and was a significant focus in 2013 as we took substantial actions to help maintain profitability as sales declined.”

Among the cost savings efforts he’s referencing are the previously announced job cuts, furloughs and temporary shut down of several plants. As of December 31, 2013, Caterpillar’s workforce was 9,703 jobs smaller than it was at year-end 2012. Caterpillar said Monday morning that it also lowered its inventory by $2.9 billion for all of 2013 and is re-sourcing products to more cost effective locations.

The year was overshadowed by a sales decline in high-margin mining products, which Caterpillar said was worse than it expected and is a situation that is unlikely to turn around in the short term. However, Chinese excavators are giving the company one reason to smile: full-year 2013 sales and revenue in China were about $3.5 billion, a more-than 20% increase from 2012. Stateside construction spending was also a bright spot: the company saw $1.8 billion in North American fourth quarter construction sales, a 21% increase over 2012 and a sign that, perhaps, the American economy is gaining steam.

Caterpillar also announced plans Monday to repurchase $1.7 billion worth of stock in the first quarter of 2014 and said that the board of directors has approved an additional $10 billion in stock repurchases through year-end 2018.

Looking towards 2014, Caterpillar is surprisingly optimistic, predicting $56 billion in full-year sales and revenue (plus or minus 5%, it said) and $5.85 in full-year per-share profit. Glossing over current worries regarding the world’s emerging markets aside, Oberhelman said, “We see some signs of improvement in the world economy, which should be positive for sales in our Construction Industries and Power Systems segments.” The company also said it expects 2014 commodity prices to be high enough to make investments attractive, but mining companies may continue to remain cautious with equipment investments.

Following the release of the better-than-expected earnings results, shares of Caterpillar popped as much as 7.1% in Monday pre-market trading. As the opening bell approached, the stock was poised to open nearly $6 higher than its Friday closing price of $86.17. The company was battered in 2013 trading, finishing the year 2.88% down against the broader market’s 30% increase.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

FCC to propose pay-for-priority Internet standards
LOS ANGELES (AP) — The Federal Communications Commission is set to propose new open Internet rules that would allow content companies to pay for faster delivery over the so-called "last mile" connection to people's...
 
 
Zynga founder Pincus leaving operations role
NEW YORK (AP) — Online game maker Zynga's founder Mark Pincus is stepping down as chief product officer, less than a year after he was replaced as the company's CEO, as the company's sales slide. Zynga...
 
 
Prefabulous World: Energy-Efficient And Sustainable Homes Around The Globe
Recently, I interviewed Sheri Koones, author of the new book titled Prefabulous World: Energy-Efficient and Sustainable Homes Around the Globe, which features sophisticated examples of eco-friendly home design in...
 
 
Note to Airlines: Start Talking to Your Customers
When it comes to air travel, there’s certainly no shortage of bad customer stories. A report released last week by the U.S. PIRG Education Fund pored through five years of airline passenger complaints to the Department...
 
 
 

Latest from the Network

The iWatch May Kill Off The iPod
Apple is set to release their sales numbers for Q2 and many analysts are now expecting iPod sales to have stalled almost entirely, prompting new expectations for the iWatch that might finally see a release later this...
Read more on Apple Balla
 
FCC to propose pay-for-priority Internet standards
LOS ANGELES (AP) — The Federal Communications Commission is set to propose new open Internet rules that would allow content companies to pay for faster delivery over the so-called "last mile" connection to people's...
Read more on Business Balla
 
Debra Messing has lost 20 pounds
Debra Messing feels great after losing 20 pounds. The former 'Will and Grace' star - who split from Daniel Zelman in June 2012 after 10 years of marriage, with whom she has 10-year-old son Roman - claims she didn't mean...
Read more on Celebrity Balla
 
Apple's iPad Rules The Enterprise. So When's The Second Act?
Apple's iPad is a fixture in the enterprise market, the company is proud to say. During the investor call for its second quarterly earnings Apple CEO Tim Cook noted–as he has in previous earnings calls–that 98% of the...
Read more on Apple Balla
 
Zynga founder Pincus leaving operations role
NEW YORK (AP) — Online game maker Zynga's founder Mark Pincus is stepping down as chief product officer, less than a year after he was replaced as the company's CEO, as the company's sales slide. Zynga...
Read more on Business Balla
 
Courteney Cox sparks engagement rumors
Courteney Cox has sparked rumors she is engaged to Johnny McDaid. The former 'Friends' actress, who started dating the Snow Patrol frontman in September, was spotted wearing a huge diamond ring on her engagement finger...
Read more on Celebrity Balla
 
Reports On The Death Of The iPad Are Greatly Exaggerated
Apple’s second quarter results were announced today by CEO Tim Cook (Mark Rogowsky has more coverage here on Forbes). As part of the earnings call, Cook talked about the sales and acceptance of the iPad. Sales are lower...
Read more on Apple Balla
 
Prefabulous World: Energy-Efficient And Sustainable Homes Around The Globe
Recently, I interviewed Sheri Koones, author of the new book titled Prefabulous World: Energy-Efficient and Sustainable Homes Around the Globe, which features sophisticated examples of eco-friendly home design in...
Read more on Business Balla
 
Note to Airlines: Start Talking to Your Customers
When it comes to air travel, there’s certainly no shortage of bad customer stories. A report released last week by the U.S. PIRG Education Fund pored through five years of airline passenger complaints to the Department...
Read more on Business Balla
 
Apple Splits Stock 7-For-1, Will Splash $130B In Cash On Investors
Talk about burying the lede. Apple announced a 7-for-1 stock split Wednesday, but not until the last sentence of a press release heralding an upsized capital return program to $130 billion and alongside the company’s...
Read more on Business Balla
 
 
Auto Balla Sexy Balla Sport Balla TV Balla Politics Balla Movie Balla Apple Balla Business Balla Ad Balla Celebrity Balla