Caterpillar Inc. (NYSE: CAT) today announced profit per share of $1.16 for the second quarter of 2015, a 26% decrease from $1.57 per share in the second quarter of 2014.
Second-quarter 2015 sales and revenues were $12.3 billion, down from $14.2 billion, or 13%, in the second quarter of 2014.
“Our Caterpillar team continues its track record of solid operational performance in the face of difficult conditions in several of the key industries we serve. Because we serve cyclical industries, we focus intently on operational execution and cost control. This is particularly important when sales decline; our goal when sales decline is to manage costs so the decline in operating profit is less than 30% of the decline in sales and revenues. We did much better than that in the second quarter. We’ve achieved that by closely watching costs, the restructuring we’ve done over the past two years and the work done by Caterpillar employees across the world who are proving we can excel in this challenging economic environment,” said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.
“Our focus during these challenging times is on operational execution and customer success through efforts like Lean Management and our Across the Table initiative with dealers, while also investing in tomorrow through new technologies, innovation and data analytics – both within Caterpillar, and by partnering with and investing in other companies,” continued Oberhelman.
With other Caterpillar segments such as Resource Industries (largely mining) and Energy & Transportation already depressed, the company's revenues from Construction Industries dropped most in the second quarter. Construction revenues fell in all global regions, down 3% in North America, Caterpillar's largest construction-segment market. Caterpillar says weakness in North American oil-and-gas-related construction was largely offset by stronger activity in residential and nonresidential building construction.
Construction sales and revenue declines were much steeper throughout Cat's other global regions: -47% in Latin America, -30% in Asia/Pacific, and -18% in Europe, Africa and the Middle East.
The economic and industry conditions that were expected at the beginning of the year are occurring. World economic growth is about as the company expected: severe weakness in mining continues, construction-related sales in China and Brazil are lower and new orders for oil-related applications declined.
The 2015 outlook for profit per share is unchanged at $4.70, or $5.00 excluding restructuring costs. The outlook for 2015 sales and revenues is about $49 billion, which is down $1 billion from the previous outlook.
“We originally set the $50 billion sales and revenues estimate in January, and our expectations haven’t changed much since then. However, currency impacts from a stronger U.S. dollar are causing sales in many countries to translate into fewer dollars than we initially expected,” said Oberhelman.
“While economic conditions in the United States are modestly positive, the global economy remains relatively stagnant. Many of the key industries we serve remain weak, and we haven’t seen sustained signs of improvement. Continuing economic weakness in China and Brazil, as well as uncertainty in the Eurozone and over Greece, haven’t helped confidence. Prices for commodities like coal, iron ore and oil are not signaling an improvement in the short term. We are committed to controlling costs as we manage through this downturn, and that will position Caterpillar for better results when conditions improve,” added Oberhelman.
Caterpillar is announcing its intention to repurchase approximately $1.5 billion of Caterpillar common stock during the third quarter of 2015. The $1.5 billion expected repurchase is in addition to the approximately $500 million of stock that was repurchased in the first half of 2015, and $4.2 billion repurchased in 2014. However, stock repurchase plans are always subject to the company’s cash deployment priorities and can change based on business and market conditions.
“In addition to operational execution around cost, quality and safety, we have a strong balance sheet and generated $1.6 billion of ME&T operating cash flow in the second quarter. Repurchasing stock is one way we return capital to stockholders, and our healthy balance sheet and strong cash flow are helping us do that despite weakness in the cyclical industries we serve. In addition to the share repurchase, the Board raised the quarterly dividend 10% in June,” said Oberhelman.