Caterpillar further cuts profit, sales forecast

Caterpillar (NYSE:CAT), the world’s No.1 heavy machinery maker, has reviewed down its forecast for 2016 profit and sales for the second time in three months as demand for mining and energy equipment has failed to pick up.

The Peoria, Illinois-based company lowered its full-year 2016 sales outlook to a range of $40-billion to $40.5-billion, from $40-billion to $42-billion. It now expects earnings of $2.75 per share, or $3.55 excluding restructuring costs, from $3.00, or $3.70 excluding restructuring costs.

While commodity prices seem to have stabilized, CAT noted they remain on the low end and had yet to translate into increased mining activity or higher demand for equipment.

At the same time, the equipment maker raised estimated expenses for restructuring during full-year 2016 to $700-million, from $550-million.

CAT’s performance is often seen as a gauge of the health of the global economy, as its machines are huge, expensive, and used in different kinds of projects to which companies and governments are only likely to commit if they're confident in the economic outlook and their financial standing.

So the revised forecast seems to be nothing but more bad news for the beleaguered global mining sector.

In fact, while the company said commodity prices seem to have stabilized, it noted they remain on the low end and had yet to translate into increased mining activity or higher demand for equipment.

“Despite a solid second quarter, we’re cautious as we enter the second half of the year,” Chief Executive Officer Doug Oberhelman said in a statement.

He also warned that more layoffs are expected before year-end as CAT tries to adapt to the tough trading environment.

“World economic growth remains subdued and is not sufficient to drive improvement in most of the industries and markets we serve,” Oberhelman said.

The guidance cut comes as second quarter revenue at Caterpillar fell 16% to $10.3bn. Sales tumbled in all categories and drove profit down to 93 cents a share, compared to $1.31 per share last year.