Caterpillar Shares Tumble After Company Misses Across The Board, Revenues Plunge 19%, Guidance Cut

Tyler Durden's picture

It never fails: a month ago, after showing CAT's abysmal global retail sales, just three days later the company announced a historic business restructuring in which in addition to slashing its guidance, and confirming the China slowdown is now a recession if only in the manufacturing sector so far, it also announced it would fire 10,000, sending its stock crashing.

Then, yesterday, ahead of today's earnings we again showed that when it comes to global demand for CAT products, there is simply no demand, and this particular dead cat refuses to bounce, with 34 consecutive months of declining revenues as well as 11 consecutive months of doubler digit sales declines.

 

We hoped this data would soften the blow from today's CAT Q3 earnings which were clearly going to be ugly, and surely worse than consensus estimates.

Moments ago we got said earnings and as expected, they were indeed far worse than expected, with CAT reporting adjusted EPS of $0.75 ($0.62 GAAP), below consensus estimate of $0.77, while revenue of $11.0 billion also missed expectations of $11.33.This takes place even as CAT repurchased $1.5 billion in stock in Q3, or about 75% of the total $2.0 billion in buybacks it conducted in all of 2015 (compared to $8 billion in the past three years).

And the punchline: the company cut its 2015 EPS outlook from $5.00 to $4.60, even as it still keeps its full year revenue guidance at $48 billion adding that 2016 sales/rev is about 5% lower than 2015. It now sees 2016 revenues down 5% from 2015.

Some more highlights:

  • Q3 Revenue: $10.962 billion, down 19% Y/Y
  • Q3 Operating profit: $713 million, down nearly 50%
  • Q3 GAAP EPS: $0.62, down 72%
  • Q3 cash from operations: $4.9 billion, down over 20% Y/Y
  • Cash: $6 billion, down from $7.3 billion at the start of the year

From the report:

"The environment remains extremely challenging for most of the key industries we serve, with sales and revenues down 19 percent from the third quarter last year.  Improving how we operate is our focus amidst the continued weakness in mining and oil and gas.  We're tackling costs, and our year-to-date decremental profit pull through has been better than our target.  We're also focusing on our global market position, and it continues to improve even in challenging end markets.  Our product quality is in great shape, and our safety record is among the best of any industrial company today," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.   

 

"Our strong balance sheet is important in these difficult times.  Our ME&T debt-to-capital ratio is near the middle of our target range at 37.4 percent; we have about $6 billion of cash, and our captive finance company is healthy and strong.  We've repurchased close to $2 billion of stock in 2015 and more than $8 billion over the past three years.  In addition, the dividend, which is a priority for our use of cash, has increased 83 percent since 2009," added Oberhelman.

It is unclear just why companies are boasting about their buyback activity, although it does bring the recent announcement of 10,000 layoffs in perspective: "The additional restructuring actions announced recently are substantial, but necessary to manage through this downturn and keep the company strong for the long term.  The actions are expected to lower operating costs by about $1.5 billion annually once fully implemented, with about $750 million of that expected in 2016."

And then the outlook, first for 2015:

The 2015 outlook for sales and revenues is about $48 billion, and that is unchanged from the outlook that was included with the September 24 announcement of new restructuring actions.

 

The outlook for profit per share is about $3.70, or $4.60 excluding restructuring costs.   The expectation for 2015 restructuring costs has increased significantly, from about $250 million to about $800 million, and is a result of the additional restructuring actions. The previous outlook for profit per share was provided in late July along with second-quarter 2015 financial results.  At that time, the outlook for profit per share was $4.70, or $5.00 excluding restructuring costs and was based on sales and revenues of about $49 billion.

And then 2016:

We expect world economic growth to be up slightly next year, from 2.4 percent in 2015 to 2.8 percent in 2016.  We expect the improvement to be led by the United States and Europe, partially offset by slower growth in China and Russia and continued recession in Brazil.  As a result, we expect prices for key commodities in 2016 to be close to current levels.  While we expect a small improvement in world economic growth, we do not expect it will be enough to improve the key industries we serve.  We do not expect construction or commodity-related industries like oil and gas and mining to improve.

2016 sales and revenues are expected to be about 5 percent below 2015.

 

* * *

 

We expect Construction Industries' sales to be flat to down 5 percent with some improvement in developed countries offset by declining sales in developing countries.  Energy & Transportation's sales are expected to be down 5 to 10 percent as a result of continuing weakness in oil and gas coupled with a weaker order backlog than in 2015.  Mining is expected to be down again, resulting in a decline in Resource Industries' sales of about 10 percent.

The preliminary outlook reflects weak economic growth in the United States and Europe with U.S. construction activity impacted by low infrastructure investment and continued headwinds from oil and gas.  It also reflects a slowing China, Brazil in recession and continuing weakness in commodity prices.

"Managing through cyclicality has been critical to Caterpillar's success for the past 90 years; it's nothing new for us or our customers.  When world growth improves, the key industries we serve – construction, mining, energy and rail – will be needed to support that growth.  We're confident in the long-term success of the industries we're in, and together with our customers, we'll weather today's challenging market conditions," Oberhelman said.

"We can't control the business cycle, but we continue to drive improvements in our business.  We're implementing Lean to drive improvements through our businesses and executing our Across the Table initiative with dealers to improve our market position, service performance and value to customers.  We're also investing in emerging technologies and data analytics tools to continue our role as an innovation leader for our customers.  As we look ahead to what will likely be our fourth consecutive down year for sales, which has never happened in our 90-year history, we are restructuring to lower our cost structure.  It's painful and will affect thousands of people, but is essential for the long-term health of the company and should position us for better results when conditions improve," added Oberhelman.

Couldn't have said it better ourselves. As for the stock, which recently soared on short covering and the latest round of corporate buybacks, it is down over 3% as of this moment and going lower.

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_ConanTheLibertarian_'s picture

2 cents below expected! The world is going to end!

/s

VinceFostersGhost's picture

 

 

Yeah....but what was expected was already pretty bad.

 

So....there you have it.

Jlasoon's picture

Exactly!, 75% of government expenditure goes to entitlements. So explain to me how the fuck CAT is suppose to turn things around? They can't, and they know it. 

847328_3527's picture

Breaking News! The USPS system will start buying CATs to deliver the mail!

Save_America1st's picture

maybe CAT should start serving all-day beakfast??? ;-)

Dr. Engali's picture

Expectations were already bad, and if they had to do all they could just to get to 2 cents under already lowered expectations then that means things are much worse than they are letting on.

VinceFostersGhost's picture

 

 

Not to pile on....but even those figures are padded.....and everyone knows that too.

 

The bright side is.....we still have the MSM telling us how great everything is going.

TideFighter's picture

But, Consumer Reports gave their dozers a 100 rating. How could things go wrong?

Hal n back's picture

McDonalds beat and stock is up 6%--despite the franchiees says MCD is in deep doo doo

Dr. Engali's picture

Clearly the solution is to borrow moar money, do a stawk buyback, and fire some people. Yeah, that will fix things.

VinceFostersGhost's picture

 

 

do a stawk buyback

 

That's why you're a doctor.....and I'm not.

E.F. Mutton's picture

It's the shovels.  The plethora of shovel ready jobs removes the need for heavy equipment.  Yeah, shovel plethoras, that must be it.

RadioFlyer's picture
RadioFlyer (not verified) E.F. Mutton Oct 22, 2015 7:27 AM

for the piles of manure!  manure plethoras spewing like hot cocoa from Grandma Yellen!

NoIdea's picture

Green by the open because MCD was strong. Noyhing else matters today now

BandGap's picture

T O A S T

Won't prevent the state of Illinois from bleeding the company and it's employees dry. Somebody has to pay for these EBT shootists.

yogibear's picture

Amazing the state of Chicago (IL) has any companies left to support the leeches.

autofixer's picture

The State of NC tried to get them to move here 10 years ago with incentives from my wallet. I guess the Illioni pockets were deeper, temporarily? Some dude once said: "A .gov big enough to give you stuff is big enough to take all of your stuff."  

NRGTDR's picture

The market will continue to grind higher until the moment ZH goes Gartman and capitulates to the bull camp.

Crabshacker's picture

Nobody is buying cat anymore, I went back to operating recently and its all kumatsu(c)s' and every other piece of Asian shit. Only cat backhoes and that's only because they got pissed off at the case dealership.

And on a side note, we're developing like its 2005 again. Literally 1000s of homes already sold so far out, still waiting for the land to be developed.. Olympia wa. Area.

I AM SULLY's picture
I AM SULLY (not verified) Crabshacker Oct 22, 2015 7:55 AM

Liar ...
I fled the Seattle area a year ago - and they seemed to be mostly producing homeless people. 

overmedicatedundersexed's picture

the government will solve cat's problem..they know everything and are all powerful..just ask our local socialists..

Arnold's picture

When do you expect the Socialistas to panic?

Before or after they call out the National Guard?

VinceFostersGhost's picture

 

 

Probably after they try to confiscate guns.....and realize what a mistake that was.

I AM SULLY's picture
I AM SULLY (not verified) VinceFostersGhost Oct 22, 2015 7:54 AM

"Gun Confiscation in America" - I can't wait to see that boon-doggle.

gcjohns1971's picture

Debt based money requires systematic and eternal expansion (money printing) to allow the debt backing the currency to be rolled over.

The process of systematically and eternally expanding the money supply systematically and progressively redistributes an ever greater share of the world's wealth from producers to bankers, governments, and cronies.

 

We have reached the point in this cycle where the remaining productive businesses can service their debts, or conduct operations, or reinvest in capital improvements...but not all three simultaneously, as is required to remain a going concern. 

Only cutbacks in the first of those three result in immediate closure of the business.

Why is it a suprise that they are cutting back on the other two?

And do not think this is an American disease.

It is not.

It is a debt-based-fiat-currency disease, which all nations currently share.

The disease is not equally advanced everywhere...but not far from it.

Your choice is hard currency or collapse of trade and hunger.

Failure to choose will result in the latter...relatively soon (at most a few years).

And the elites are so consumed with hubris, they believe their world does not depend on yours...even as they systematically loot you (if you were not necessary, why the looting?)

Shortly they are as mad, or more so, than Nero.

withglee's picture

Debt based money requires systematic and eternal expansion (money printing) to allow the debt backing the currency to be rolled over.

All money is "a promise to complete a trade". It is created by traders making future delivery promises and getting them certified. It is destroyed when the trader delivers and returns the certificates as promised. Thus, "all" money is obviously "debt-based" ... a promise to do something en-debts he who promises. Money was invented "by traders" to enable simple barter trade over time and space, just as traders invented insurance to spread risk.

That said, this nonsense of "requiring systematic and external expansion" is easily dispelled. Before money is created by a given trading promise, none exists related to that promise. After delivery, none exists related to that promise. Thus, there is obviously no issue at all. Should the trader DEFAULT on his promise, that DEFAULT is immediately countered with an equal INTEREST collection. This guarantees zero INFLATION of the MOE itself.

"Rolled over" trading promises are "defaults". If they are not immediately mitigated by like "interest collections", then "inflation" occurs.

The governing relation is: INFLATION = DEFAULT - INTEREST

 

tommylicious's picture

SO BUY MOAR STAWKS YOU STUPID CUNTS!!!!!!!!!!!   

Jlasoon's picture

They've been buying back for years. This is getting ugly. 

localizer's picture

It's rather sad to see good manufacturing companies with great history struggle... it's almost as if the great companies disappear, get "merged" and destroyed (see Nokia) or moved overseas whereas those who produce crap and don't pay taxes are doing great...

I AM SULLY's picture
I AM SULLY (not verified) Oct 22, 2015 7:52 AM

Yeah - but as Jim Cramer would say, Caterpillar is just a proxy for the world economy ...

(crap)

Phillyguy's picture

Caterpillar’s problems are the direct of a lack of demand- read insufficient purchasing power by working people. How can there be any economic growth, when unemployment is high, job growth is anemic and > 90% of “new” jobs are temp positions (like those “new” seasonal jobs at Amazon)- minimum wage, no benefits or job security. The FED (& other central banks) have created a perpetual economy by flooding banks with money from taxpayers (QE), this money in turn has inflated assets- stocks and trendy real estate in SF, NYC, Boston, etc. Any time the stock market drops, look for the FED (read- taxpayers) to supply more ultra-cheap money to buy more (already) inflated stocks.

 

 

curbyourrisk's picture

And a warning from 3M too.  But just STFU and BTFD.

Turdy Brown's picture

CAT equipment sucks!

all-priced-in's picture

My brokerage account tracking is all fucked up -

 

I show CAT UP 2% - over $70 -

 

Is up the new down?

 

 

 

22winmag's picture

Fuck WMT.

 

CAT is the canary in the coal mine.

withglee's picture

Is just harvest time for the money-changers. They call it the "business cycle".

yellowsub's picture

If Caterpillar was smart, they should retrofit their large machines to war machines to boost profits.  

 

MASTER OF UNIVERSE's picture

"We're confident of the long-term-success of the industries we're in,,"

said Oberhelman.

 

Dear Douglas Oberhelman CEO CAT,  I warned you six years ago that you should step down, and fire the entire Board of Directors at CAT. You did not listen, or take heed to my most generous warning, fucktard.

 

Note: I am nominating Chief Executive Officer Douglas Oberhelman for the ASSCLOWN of the Decade Award.