Dive Brief:
- Caterpillar beat industry earnings projections for the fourth quarter of 2016 by 17 cents a share but saw its annual revenue fall by almost $1.5 billion, according to CNBC.
- The construction equipment giant also lowered its 2017 projections for sales and revenue from $38 billion to between $36 billion and $39 billion and forecast that profit per share would come in at $2.90, down slightly from analysts' expectations of $3.04.
- The company said an overabundance of equipment stock in North America along with weak demand in the global construction and energy sectors will continue to bog down sales through 2017.
Dive Insight:
On a positive note, Caterpillar's share prices are up 16% since the November presidential election, a campaign that saw Donald Trump tout a $1 trillion infrastructure plan. Many other construction-related businesses saw a bump in their stock prices for the same reason.
Caterpillar launched a $1.5 billion downsizing initiative in 2015. The company's original plan was to lay off approximately 10,000 workers and close or consolidate some plants by 2018, but it has since expanded its workforce reduction action to a total of 16,000. It has also delayed construction of a new headquarters in Peoria, IL, and told analysts that it would add $500 million to its restructuring costs in 2017.
Since its last earnings report, former Chairman and CEO Doug Oberhelman resigned after 40 years with Caterpillar, and Jim Umpleby has assumed the position of CEO. Another Caterpillar executive, Dave Calhoun, will step up as chairman this year. As part of a slight reorganization of its leadership policy, Caterpillar also decided that the positions of CEO and chairman would no longer be held by one person at the same time as a management control.
The company has attempted to manage market expectations around the potential opportunities from Trump's focus on infrastructure. According to CNBC, the company maintains that proposed tax reforms and increased road and highway spending would provide a positive impact for Caterpillar, but it doesn’t expect to see real effects from these initiatives until 2018.
