Watch Industrial Sector Following Caterpillar's Disappointing Q1 Outlook

Caterpillar Inc. CAT shares fell 2 percent in the pre-market after the company's first quarter outlook missed Street views by a wide margin as it is struggling to cope with weaker demand. Shares recovered on Thursday morning trading.

Caterpillar, which makes farm and construction equipment, expects first quarter adjusted earnings of 65 to 70 cents a share and GAAP earnings of 50 to 55 cents a share. Sales and revenues are estimated to be in a range of $9.3 billion to $9.4 billion.
Wall Street analysts, on an average, expected earnings of 97 cents a share on revenue of $10.36 billion for the first quarter.

Full Year Guidance Maintained

Of note, the company remained comfortable with its full year guidance of $3.50 per share in earnings and revenue between $40 billion and $44 billion. The Street is looking for a profit of $3.70 per share on revenue of $41.34 billion.

The guidance was provided at the Bank of America Merrill Lynch Global Industrials Conference, according to a filing with the SEC.

Watch Sector

Investors should watch other key player in the industry, Deere & Company DE, which recently announced the indefinite layoff of about 125 employees at two factories in Iowa due to weak demand.

Lower commodity prices are forcing farmers and energy firms buy less equipment, thereby denting a hole in topline of companies such as Caterpillar and Deere. Globally, an economic downturn in China and Brazil are also hurting farming and industrial equipment makers.

Shares of Caterpillar are still up about $7 apiece in 2016.