Caterpillar slashes forecast again, sees slowing economy
By Ernest Scheyder, Reuters
October 24, 2012, 12:17 am TWN
Reuters--Caterpillar Inc., the world's largest maker of tractors and excavators, slashed its 2012 forecast for the second time this year and warned the global economy was slowing faster than it had expected.
The cautionary note was the latest in a string of comments from multinational manufacturers, including General Electric Co. and Honeywell International Inc., that the economic recovery remains tenuous and tepid at best.
Caterpillar's retail dealers are selling off inventories, rather than buying new machines, forcing the company to idle some production at plants earlier this year with additional shutdowns coming, executives said on Monday.
“As we've moved through the year, we've seen continued economic weakening and uncertainty,” Chief Executive Doug Oberhelman said in a statement.
The statement also noted that sales in China, the world's largest user of construction equipment, had also declined in the quarter and had yet to improve, although Caterpillar expected China's construction industry to pick up through next year.
Caterpillar does not expect the global economy to begin to improve until the second half of 2013. It anticipates that China will take further steps to prod its slowing economy.
“We expect additional easing in 2013 and project economic growth will improve to 8.5 percent” in China, it said. That forecast compares with economists' expectations for 7.8 percent, according to a recent Reuters poll.
The company's shares rose 1.45 percent to US$85.08 on Monday.
Analysts and investors said the stock, down more than 20 percent in the past six months, appeared to offer a good buying opportunity given Caterpillar's strong growth prospects after the world economy recovers.
“The next couple of quarters will be tough-going, but longer-term I don't think their competitive position is threatened,” said Morningstar analyst Adam Fleck. “They're still globally the world leader, and this isn't an industry that is going away.”