Caterpillar fourth-quarter results top predictions
APNEW YORK--Caterpillar used a combination of cost-cutting and strong sales of construction equipment to deliver a fourth-quarter profit that topped Wall Street estimates and gave the sagging stock market some needed support.
January 29, 2014, 12:08 am TWN
The Peoria, Illinois, company has been buffeted by a sharp downturn in the global mining industry. Sales of mining equipment plunged 48 percent in the fourth quarter and profit in the mining business dropped 77 percent. As sales of large tractors and mining loaders slumped last year, Caterpillar shut plants and cut jobs. Those moves helped slash overall operating costs by US$2 billion in the fourth quarter.
Strong results in construction and power systems also made up for the shortfall in mining. The construction business posted an operating profit of US$500 million in the quarter, compared with just US$26 million in the same quarter a year ago, aided by increased spending in the U.S. And Caterpillar's profit from industrial engines and power generators rose 38 percent to US$964 million.
Caterpillar's outlook for 2014 is also slightly better that what Wall Street is projecting. And the company's board approved a new US$10 billion buyback.
That was all welcome news for investors. Caterpillar is one of the 30 stocks in the Dow Jones industrial average, so its 4 percent increase Monday helped limit losses in the benchmark index. The Dow can use the assist — it plunged nearly 500 points over Thursday and Friday. It was down 70 points, or 0.4 percent, at 15,809 in afternoon trading.
Caterpillar shares rose US$3.42 to US$89.59. The stock gained just 1.3 percent last year, compared with a 27 percent increase in the Dow.
One recent concern for the stock market has been growth in China. Caterpillar said sales in China rose 20 percent in 2013. For this year, Caterpillar expects China's economy to grow slightly more than 7.5 percent — about the same as this year. That should boost sales of excavators and other machinery, the company said.
Overall, for the three months ended Dec. 31, Caterpillar Inc. earned US$1 billion, or US$1.54 per share. That compares with US$697 million, or US$1.04 per share, a year earlier. The result topped analysts' forecast for a profit of US$1.27, based on a survey by FactSet.
Revenue declined 10 percent to US$14.4 billion from US$16.08 billion, but still beat Wall Street's forecast of US$13.41 billion.
Caterpillar said full-year net income dropped to US$3.79 billion, or US$5.75 per share, from US$5.68 billion, or US$8.48 per share, in the previous year. Annual revenue fell 16 percent to US$55.66 billion from US$65.88 billion.
For 2014, the company anticipates adjusted earnings of US$5.85 per share on revenue of about US$56 billion. Analysts predict earnings of US$5.75 per share on revenue of US$55.36 billion, on average.