(Minews) - Caterpillar Inc., the world’s largest mining and construction equipment maker, forecast 2015 sales and earnings that trailed analysts’ estimates as plunging oil prices signal lower demand from energy companies.
Earnings will be $4.75 a share excluding restructuring costs, the Peoria, Illinois-based company said in a statement on Tuesday. The average of 27 estimates compiled by Bloomberg was for $6.69 a share.
Revenue will fall to about $50 billion, compared with the average estimate of $55.2 billion. The shares fell 8.2 percent to $78.95 at 8:54 a.m. in New York.
“The recent dramatic decline in the price of oil is the most significant reason for the year-over-year decline in our sales and revenues outlook,” Chairman and Chief Executive Officer Doug Oberhelman said in the statement.
Crude’s slump of more than 40 percent in the past six months is the latest headwind for Caterpillar, which had already seen declining orders from the mining industry for its signature yellow machines. In the last two years its revenue has fallen by about $10 billion as coal and iron-ore prices declined. Copper prices are also down in January.
The latest outlook represents a marked deterioration from October, when Caterpillar forecast 2015 sales would be flat to slightly higher.
Oberhelman said today that current oil prices are a “significant headwind” for its energy and transportation unit, which makes compressors, pumps and turbines for oil and natural-gas companies. It’s also a “negative” for Caterpillar’s construction business in oil-producing regions, Oberhelman said. Caterpillar said the outlook for construction equipment sales in China is lower.
“We are hopeful the guidance is conservative enough to provide a base level expectation for 2015 but it was a surprise even against lower expectations,” said Larry De Maria, an analyst at William Blair & Co. in New York.
Fourth-quarter profit also missed expectations. Net income fell to $1.23 a share from $1.54 a year earlier. Excluding some items, earnings were $1.35 a share, while the average estimate was for $1.55.
Revenue dropped to $14.2 billion from $14.4 billion, matching the average estimate.
Retail machinery sales were down 12 percent in the quarter, Caterpillar said Monday.
Breaking it down by industry, sales to the resource industry -- largely mining companies -- slumped 22 percent. Construction was down 9 percent, although there were small gains in North American and Europe, Africa and the Middle East.
Caterpillar’s sales to energy and transportation customers -- a segment that includes rail locomotives as well as oil companies -- were up 22 percent.
The company also said Tuesday it doesn’t anticipate “significant improvement” in the world economy. It projected growth of about 2.7 percent in 2015, with gains coming mostly from developed countries. The average estimate of economists in a Bloomberg survey is for global growth of 2.76 percent.
