For companies with operations in farm and construction machinery, it appears the remainder of the year remains somewhat of a question mark. The housing recovery in the U.S. -- which was made public this week with the release of government figures -- certainly bodes well and could increase demand for construction machinery. However, lackluster public sector growth has put a damper on the overall outlook in the United States.
One company affected by this downward trend is heavy machinery maker and Dow Jones component Caterpillar (NYSE: CAT), which stuck its proverbial index finger into the air this week by releasing its longer-term growth outlook, indicating this firm knows what the next few years holds for the sector and for the economy in general.
Speaking to the MINExpo International 2012 convention in Las Vegas, Caterpillar Chairman and CEO Doug Oberhelman and his executive cohorts updated analysts on the company's strategy and expectations for 2015. They also hinted that they are braced for the worst.
Saying he foresees moderate economic growth between now and 2015, Oberhelman told conventioneers, "we think this is a reasonable view and the most likely outcome, and based on that, we expect 2015 sales and revenues for Caterpillar to be in a range of $80 to $100 billion (U.S.), and for profit in a range of $12 to $18 (U.S.) per share.
"But just as we have done in the past, Caterpillar is ready to act if we enter a recession. We don't think it's likely, but if it happens, we are prepared to react and would expect to remain attractively profitable and to maintain our dividend."
Certainly the company has made note of the storm clouds: the Nashville-based Caterpillar last reported quarterly financials in late July, revealing that second-quarter 2012 revenues came in at $668 million U.S., a dip of $7 million, or 1%, over the prior-year quarter.
Second-quarter 2012 profit after tax was $104 million, a $3-million, or 3%, decrease from the second quarter of 2011.
The company ascribed the decrease in revenues to a $28-million unfavorable impact from lower rates on new and existing finance receivables and operating leases and $9 million lower net gains from returned or repossessed equipment. This red ink was partially offset by a $33-million favorable impact from higher average earning assets (finance receivables and operating leases at constant rates).
With 2011 sales and revenues of $60.1 billion U.S., Caterpillar boasts being the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
Wednesday’s stock price for CAT was just below $87 U.S., down 0.3% from the day before, and a fair drop from its 52-week high of $116.95, achieved in February. The gully for the past 52 weeks was $67.54, plumbed in early October of last year. Whether its CEO’s words reflect hard-nosed reality or simply putting up a brave front, CAT’s is a situation that bears over the next few weeks, as Americans assess whether a second Obama administration is merited, or whether the first has turned the economy down the wrong road.
