Caterpillar Q1 Profit Falls, Misses View; Cuts FY16 Outlook; Stock Down

(RTTNews) - Caterpillar Inc. (CAT) reported a plunge in first-quarter of 2016 profit from the prior year. It cuts its profit outlook for fiscal year 2016, due to expected decline in sales and revenues and an increase in expected restructuring costs. It lowered the midpoint of the outlook for 2016 sales and revenues about 2 percent.

"While first-quarter results were about as we expected, sales and profit were well below the first quarter of 2015. Sales declined across the company with substantial reductions in construction, oil and gas, mining and rail," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.

Adjusted earnings per share missed analysts' expectations, while quarterly revenues topped their estimates.

In pre-market trade, CAT is currently trading at $77.50, down $1.16 or 1.47 percent.

Profit attributable to common stockholders plunged to $271 million or $0.46 per share from $1.245 billion or $2.03 per share in the same quarter last year.

Excluding restructuring costs, profit per share was $0.67, compared with $2.07 per share in the first quarter of 2015. Analysts polled by Thomson Reuters expected the company to report earnings of $0.68 per share for the first-quarter. Analysts' estimates typically exclude special items.

As discussed in the year-end 2015 earnings release, Caterpillar has implemented a change in accounting principle for pension and OPEB costs. Under the new accounting principle, the company will recognize actuarial gains and losses as a mark-to-market gain or loss when they occur rather than amortizing them to earnings over time.

First-quarter 2015 profit per share has been recast from $1.81 per share to $2.03 per share. Excluding restructuring costs first-quarter 2015 profit per share has been recast from $1.86 per share to $2.07 per share.

Caterpillar worldwide, full-time employment was about 101,400 at the end of the first quarter of 2016, compared with about 113,300 at the end of the first quarter of 2015, a decrease of about 11,900 full-time employees. The flexible workforce decreased by about 3,200 for a total decrease in the global workforce of about 15,100. The decrease was primarily the result of restructuring programs and lower production volumes.

Sales and revenues for the first-quarter were $9.46 billion, down from $12.70 billion in the first quarter of 2015. Wall Street expected revenues of $9.39 billion for the quarter.

The company said it has seen recent increases in commodity prices, some signs of improvement in construction equipment in China and better order activity than it expected at bauma. While it is seeing a few positive signals, other parts of business remain challenged. As a result, it has lowered the midpoint of the outlook for 2016 sales and revenues about 2 percent.

Sales and revenues in 2016 are expected to be in a range of $40 billion to $42 billion with a midpoint of $41 billion. Analysts expect the company to report revenues of $40.61 billion for fiscal year 2016. The previous outlook was a range of $40 billion to $44 billion with a midpoint of $42 billion.

The decline in the midpoint of the sales and revenues outlook range is a result of several factors that, while not individually large in the context of the outlook, collectively add up to about $1 billion. Those factors include lower transportation sales, lower mining sales and weaker price realization than previously expected.

The profit outlook at the midpoint of the sales and revenues range is now $3.00 per share, or $3.70 per share excluding restructuring costs. Analysts expect annual earnings of $3.59 per share. The previous profit outlook was $3.50 per share, or $4.00 per share excluding restructuring costs at the midpoint of the previous sales and revenues outlook. The expected decline in sales and revenues and an increase in expected restructuring costs are the primary reasons for the decline in the profit outlook.

Restructuring costs are now expected to be about $550 million in 2016, up $150 million from the previous outlook. The decision to end production of on-highway vocational trucks is the primary reason for the increase in restructuring costs.

Separately, Cat Financial reported that its first-quarter 2016 profit was $100 million, a $33 million, or 25 percent, decrease from the first quarter of 2015.

Cat Financial's first-quarter 2016 revenues of $643 million, a decrease of $46 million, or 7 percent, compared with the first quarter of 2015. The decrease in revenues was primarily due to a $23 million unfavorable impact from lower average earning assets and a $13 million unfavorable impact from lower average financing rates.