Caterpillar Warns, Cuts Forecasts

by Alyssa Oursler | September 25, 2012 9:34 am

First it was FedEx (NYSE:FDX[1]), the go-to global economic bellwether, that warned of a rough road ahead when it cut expectations for first quarter profits because of weakness in the global economy.

The next red flag? Caterpillar (NYSE:CAT[2]). The company — considered a key measure of health for the manufacturing, mining and construction sector — just announced that it is also expecting to suffer from global weakness … all the way through 2015.

The company cut its earnings forecast for — yes, you heard correctly — three years down the road, and is now expecting between $12 and $18 as opposed to its original range of $15 to $20.

Why is the company looking so far ahead? Well, because it had already made the optimistic call for an EPS of $20 in 2015 on the heels of its acquisition of mining equipment maker Bucyrus International — the largest deal in the company’s history.

And judging by the “fairly anemic and modest growth” that looks to be in store through then, CAT must have felt it was better to give investors time to digest the fact that such expectations may have been a little lofty.

Investors sent shares down just under 2% after the bell, bring the stock’s year-to-date movement slightly in the red.

That’s better than where it sat earlier in the summer, though. CAT was wallowing in double-digit losses around the end of July, despite the fact that the company posted an eye-popping second quarter: 21% revenue growth, 67% profit growth, an EPS 26 cents better than Wall Street had been expecting and a first half that put it on track for a record-setting year.

At that point, InvestorPlace contributor Dan Burrows — who picked Caterpillar for the site’s Ten Best Stocks of 2012 contest — said, quite simply, that “Fear was trumping fundamentals.”

While we’ll have to wait until next month for the company’s most recent results and updated outlook for this year, investors seem to have more of a reason to fear Caterpillar in the meantime — and to worry about the global economic outlook as a whole.

As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.

Endnotes:
  1. FDX: http://studio-5.financialcontent.com/investplace/quote?Symbol=FDX
  2. CAT: http://studio-5.financialcontent.com/investplace/quote?Symbol=CAT

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