Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Caterpillar Inc. shares dropped by the most in six months after maker of iconic yellow bulldozers reduced its sales outlook from a slowdown in construction activity around the world.
The company warned investors on Wednesday during its latest earnings report that full-year sales and revenue are forecast to be “slightly lower” than it previously anticipated, and signaled that fourth-quarter revenues will be lower than the year-earlier period.
The disclosure — along with quarterly results that fell short of Wall Street’s expectations — drove shares down as much as 5.2% in New York, the biggest intraday decline since late April.
The cautious forecast by one of the world’s biggest heavy machinery producers comes amid uncertainty around the November election in the US — Caterpillar’s largest market — and lingering growth concerns in China. The Irving, Texas-based company is viewed as an economic bellwether, with demand for its equipment used at construction sites, mining operations and energy projects tied to the health of global industries.
Caterpillar’s adjusted per-share earnings of $5.17 for the third quarter missed the $5.34 average estimate of analysts polled by Bloomberg.
Sales of construction equipment, Caterpillar’s biggest business segment, dropped 9% from the same period a year ago on lower sales volumes of machines to customers and lower prices, the company said. North America along with the Europe, Africa and Middle East region were especially weak, with each geographical segment seeing revenue decline about 11% and 15%, respectively. Sales in the segment to the Asia-Pacific region dropped 12%.
Chief executive officer James Umpleby said during Wednesday’s quarterly earnings call that he expects demand from China to remain at a relatively low level.
Mining equipment revenue fell about 10%, also mainly due to lower sales volumes. Energy and transportation was a bright spot, with the segment seeing a 5% boost in sales.
“Although we have lowered our expectations for sales to users in the fourth quarter, primarily due to lower rental fleet loading, dealer rental revenue continues to grow,” Umpleby said on the call. “In addition, government-related infrastructure projects are expected to remain healthy.”
(By Joe Deaux)
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