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Caterpillar Cuts Forecast On Dreary Economic Outlook

This article is more than 7 years old.

Caterpillar isn't exactly optimistic about the global economy.

The heavy equipment maker slashed its outlook and announced further job cuts on Tuesday, saying that soft economic growth is hampering its business.

"World economic growth remains subdued and is not sufficient to drive improvement in most of the industries and markets we serve," the company said in a statement. Caterpillar specifically referenced Brexit and the attempted coup in Turkey, saying these events have added to global uncertainty. It also mentioned that commodity prices appear to have stabilized but are still low.

All of this has contributed to a pullback in spending from its customers, as they tighten the purse strings out of necessity or caution, and weighed on Caterpillar's business.

The company now expects to earn $3.55 per share this year, excluding restructuring costs. This is down from the $3.70 per share that Caterpillar had previously projected. It also sees revenue coming in between $40 billion and $40.5 billion this year, down from earlier forecasts of $40 billion to $42 billion.

Caterpillar also said that further layoffs were in order. The company employs some 112,000 people around the globe and has already let 14,000 employees go in the last year.

“Despite a solid second quarter, we’re cautious as we enter the second half of the year," said CEO Doug Oberhelman in prepared remarks. "We’re not expecting an upturn in important industries like mining, oil and gas and rail to happen this year."

Caterpillar's revenue declined 16% to $10.34 billion in its latest quarter, while adjusted earnings tumbled to $1.09 per share from $1.40 a year earlier. However, the company still managed to top Wall Street expectations.

Caterpillar "is not seeing any signs of upturns in its markets, but we think it's doing a good job managing costs," said S&P Global analyst J. Corridore in a note following the results. This will likely be the fourth straight year of declining sales, he added.

Shares of Caterpillar, which are up 16% this year, rose about 1% to $79.97 in morning trading.