Caterpillar's expectations dented in North America
Heavy equipment manufactured by Caterpillar works at the base of the Freedom Tower on Sept. 5 in New York. Caterpillar said Friday its third-quarter earnings rose 21 percent.
Heavy-equipment maker Caterpillar said Friday its third-quarter earnings rose 21 percent but lowered its outlook for the year based on slow U.S. economic growth.
Shares of both Caterpillar and its competitors fell, leading the Dow Jones industrial average down more than 360 points.
Peoria-based Caterpillar earned $927 million, or $1.40 per share, compared with $769 million, or $1.14 per share in the year-ago quarter.
Revenue increased 9 percent to $11.44 billion, from $10.52 billion in the prior-year period. The company cited strength in integrated services, which is its business that combines financial services, parts, logistics and other operations, that offset slow North American sales of machinery and truck engines.
"These results clearly demonstrate our global reach and the stability and strength of our growing integrated service businesses," Chairman and Chief Executive Officer Jim Owens said in the earnings release. "We delivered strong returns for our stockholders despite continuing severe weakness in key U.S. markets."
Analysts were expecting a profit of $1.43 per share on revenue of $11.19 billion, according to a Thomson Financial poll.
For the full-year, the company expects to earn $5.20 to $5.60 per share, compared with previous guidance of $5.30 to $5.80 per share.
Several analysts said Friday they weren't surprised the results fell short of Wall Street expectations, but the diminished outlook appeared to take investors by surprise.
Caterpillar shares fell 5.27 percent, or $4.09, to close at $73.57 Friday. In all, 16.1 million Caterpillar shares changed hands, more than twice the average volume.
Similarly, shares of Deere & Co. were down 4.86 percent to $145.14, shares of Hitachi Ltd. were off 1.88 percent to $63.80, and CNH Global NV shares fell 5.36 percent to $57.60.
"They're experiencing cost pressures, and I think just the housing markets are a little bit worse than people had expected," Morningstar analyst John Kearney said.
Housing starts during the company's third quarter, which ended Sept. 30, were down 24.1 percent from a year earlier to 3.91 million, according to the U.S. Census.
The company's North American truck-engine sales were off, too, driving down sales of all engines in North America by 16 percent, or $250 million.
That, too, was expected, Kearney said. Trucking companies bought heavily the previous two years ahead of new emission restrictions put in place this year.
Caterpillar said profits were bolstered by strong international revenues -- more than half the company's sales are overseas. The company credited continued strength in oil and gas exploration, mining and other industries abroad that use heavy equipment.
Overall profit on machines sales was up 9 percent to $681 million on sales of $7.12 billion, despite a 12 percent drop in North American sales.
And worldwide profit on engine sales was up 33 percent to $529 million on $3.55 billion in revenue.
"Engines profitability was extraordinary," Morgan Stanley & Co. analyst Robert Wertheimer wrote in a note to investors.