Construction and mining equipment manufacturer Caterpillar Inc. (CAT) Wednesday reported a plunge in fourth-quarter profit as revenue declined from the previous year due to tough economic conditions.
Looking ahead, the company said it is encouraged by signs of improving demand, but issued 2010 earnings outlook below Wall Street consensus estimate. The company's stock is trading lower by over 6%.
Profit attributable to common stockholders for the just concluded period plunged to $232 million or $0.36 per share from $661 million or $1.08 per share in the prior-year period. Excluding redundancy costs, profit for the fourth quarter was $0.41 per share. On average, 23 analysts polled by Thomson Reuters expected quarterly earnings of $0.28 per share. Analysts' estimate typically exclude special items.
Total sales and revenues for the quarter declined to $7.898 billion from $12.923 billion reported last year. Analysts expected revenues of $8.11 billion for the quarter.
Caterpillar said price realization improved $199 million in the quarter, and currency had a positive impact of $219 million on sales, primarily due to a stronger Australian dollar and euro.
Geographically, revenues from North America fell to $2.724 billion from $4.702 billion and EAME revenues dropped to $2.096 billion from $3.827 billion reported last year. Asia-Pacific region generated $1.948 billion in the latest quarter, compared to $2.590 billion last year. Revenues from Latin America dropped to $1.130 billion from the previous year's $1.804 billion.
The Peoria, Illinois-based company, which primarily makes machinery and equipment, also manufactures and sells diesel and natural gas engines, as well as industrial gas turbines. The company also has a financial services business in its fold.
Fourth-quarter sales of Machinery and Engines fell to $7.193 billion from $12.120 billion in the prior year. Machinery sales volume was down $3.357 billion, and Engines volume declined $1.988 billion from the previous year. Revenues of Financial Products dropped to $705 million from $803 million in the prior year.
Fourth-quarter operating profit dropped to $128 million from $457 million in the prior year. Total operating costs for the quarter declined to $7.770 billion from $12.466 billion reported last year.
Income tax benefit for the quarter was $91 million, compared to $296 million last year.
For the third quarter of 2009, the company's net income was $404 million, or $0.64 per share, down from $868 million, or $1.39 per share, in the year-ago quarter. Total sales and revenues for the quarter dropped 44% to $7.30 billion from $12.98 billion in the prior year.
For the full year, profit plunged to $895 million or $1.43 per share from $3.557 billion or $5.66 per share in the prior year. Excluding redundancy costs of $0.75, 2009 profit was $2.18 per share. Total sales and revenues declined to $32.396 billion from $51.324 billion generated last year. Wall Street looked for full-year earnings of $2.02 per share on revenues of $32.59 billion.
Caterpillar's worldwide employment was 93,813 at the end of 2009, down 19,074 from last year.
Looking ahead, Caterpillar expects profit to be about $2.50 per share in 2010 and sales and revenues are estimated to be up 10% to 25% from 2009. Wall Street expects full year 2010 earnings of $2.71 per share on revenues of $36.06 billion.
The company said it continues to see signs of economic improvement, particularly in China and most developing countries. ''We are also seeing signs of improvement in North America, Europe and Japan, but these economies remain weak and have not rebounded as quickly as developing countries,'' it said. The company added that demand for mining equipment has increased due to continued strong commodity prices and growing confidence in economic recovery.
Caterpillar Chairman and Chief Executive Officer Jim Owens said, "While the economy in 2009 was the worst our company has experienced since the Great Depression, I'm proud to report that Team Caterpillar responded in an extraordinary way...We're encouraged by signs of improving demand. Dealer sales to end users are up, order rates are up, dealer inventories came down in 2009, and we're seeing stronger service parts sales. As a result, we are focused on increasing production levels in our plants and with our suppliers. Although we expect efficiency improvements in 2010, higher production will require selective increases in employment, and we've already recalled more than 500 previously laid-off production employees.''
The company does not expect significant redundancy costs in 2010.
Caterpillar expects developing economies to lead the economic recovery in 2010. Economic growth in the developing world should be about 6% in 2010, up from 1.5% growth in 2009, it said. The company expects world demand for most commodities to increase this year, further tightening supplies.
The company estimates more than 10% growth in China and 8% growth in India, which should continue to improve construction spending and encourage investment in mining capacity. Caterpillar forecast 3.5% growth in the U.S. economy, which is slower than past recoveries from severe recessions.
Japan's Komatsu Ltd (KMTUY.PK), Caterpillar's larger rival, is expected to report sharp earnings recoveries for the October-December period, as demand increased from infrastructure projects in emerging economies and at mining companies, Nikkei reported last week. Komatsu is expected to have ended the quarter with an estimated 16 billion yen in group operating profit, up 40% from the preceding quarter. Komatsu's group sales in the October-December quarter likely edged 10% above the previous quarter's tally to roughly 360 billion yen, the report added.
Agricultural and construction equipment manufacturer CNH Global NV (CNH) Monday reported a 75% decline in fourth-quarter profit, while revenues dropped over 10% from last year. The Amsterdam, the Netherlands-based company's net income attributable to CNH Global plunged to $28 million from $114 million reported last year. Earnings per share for the quarter dropped to $0.12 from $0.48 in the prior year. Total revenues for the quarter dropped to $3.510 billion from $3.941 billion in the prior year.
Caterpillar Financial Services
Separately, Caterpillar Financial Services, a wholly owned subsidiary of Caterpillar, said its fourth-quarter profit after tax was $43 million, a $30 million increase from last year's $13 million. The increase stemmed mainly from the absence of an unfavorable $63 million impact related to mark-to-market adjustments on interest rate derivative contracts and net currency exchange gains and losses in the fourth quarter of 2008.
Cat Financial reported fourth-quarter revenues of $657 million, a decrease of $77 million, or 10%, from $734 million reported in the same period last year. The decrease in revenues was principally due to a $58 million impact from a decrease in earning assets and a $23 million impact from returned or repossessed equipment, partially offset by a $9 million favorable impact from higher interest rates on new and existing finance receivables.
The unit's full-year profit after tax declined 33% to $259 million from $385 million in 2008. Revenues for the year dropped 11% to $2.714 billion from last year's $3.058 billion.
CAT is currently trading at $52.05, down $3.80 or 6.80%, on 11.99 million shares. For the past year, the stock traded in the range of $21.71-$64.42.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.