Caterpillar Crawls Backward on Earnings and Guidance, Inches Ahead on Stock Repurchase

Caterpillar

has opened the week slightly up, despite missing first-quarter earnings estimates and lowering its guidance. The Peoria, Illinois-based firm's EPS declined 45 percent to $1.31, missing the Wall Street consensus of $1.40. Revenue declined 17.5 percent year-over-year to $13.21 billion, falling short of the $13.72 billion analysts expected.

Caterpillar's resource industries (mining) revenue plunged in Asia/Pacific and North America, falling 34 and 36 percent, respectively. Revenue in Europe, the Middle East and Africa (EMEA) and Latin America performed a little better, but still fell 10 percent in the respective regions. Overall, this segment dropped 23 percent during the quarter.

Of the $7.5 billion authorized in 2007, only $3.8 billion worth of stock has been repurchased by the company. And, no repurchases have been made since the end of 2008. However, Caterpillar will resume the program in the second quarter and expects to rein in about $1 billion worth of stock. Chairman and CEO Doug Oberhelman cites “the recent decline in the Caterpillar stock price combined with balance sheet strength and positive cash flow” as the motivation for the move.

On April 10, the company announced it will maintain its $0.52 per share quarterly cash dividend. It will be paid to shareholders of record as of the close of business today, April 22, on May 20.

Caterpillar has revised its fiscal 2013 sales projection to $57-$61 billion, down from the previous guidance of $60 to $68 billion. If its updated figure pans out, the farm and construction machinery manufacturer will not reach analysts' expectations of $62.74 billion. The company has also lowered its earnings guidance from $7-$9 to just $7 per share. At this figure, it would fall far short of the current consensus of $7.71. Projected declines in Caterpillar's mining segment are responsible for the reduced prospects. According to Oberhelman, “While expectations for Construction Industries and Power Systems are similar to our previous outlook, our expectations for mining have decreased significantly. Our revised 2013 outlook reflects a sales decline of about 50 percent from 2012 for traditional Cat machines used in mining and a decline of about 15 percent for sales of machines from our Bucyrus acquisition.”

Despite its weak earnings and woeful guidance, Caterpillar is moving forward on Wall Street as the week begins. Investors appear to favor the resumption of the company's stock repurchase program, which seems to be the only positive news as Monday trading gets under way. Caterpillar is up approximately one percent on Monday.