Caterpillar is likely to cut its earnings estimates several times over the coming year, says Axiom Capital analyst Gordon Johnson, who rates CAT shares a Sell.
Caterpillar has been ravaged as depressed prices for iron ore, copper and other commodities, cheaper oil and weakness in developing countries have hobbled sales of bulldozers, excavators, mining trucks and engines.
Last month, Caterpillar warned the full-years revenue could fall to a six-year low of $42 billion, suggesting a 10 percent sales drop, or more than double what the company predicted in October.
CAT's just-released SEC Form 8-K detailing its rolling three-month machine sales show a 39 percent drop in global energy and transport sales. In a separate company presentation prepared for Barclays Industrial Select Conference, Cat predicts energy and transport sales for the full year dropping 10 to15 percent, which has analysts questioning where the difference will be found.
Cat's 2016 presentation also sees global construction industries sales down about 5-10 percent, which is in keeping with its SEC January global sales 7 percent decline. Cat told the Barclay conference the company estimates its resource industries could be down 15-20 percent for the year, but Cat's SEC filing showed January's figures dropping 35 percent.
Caterpillar reminded investors that its business is seasonal, with the 1st and 3rd quarters generally weaker, but strong in Spring/Summer. Cat expects a similar seasonal pattern this year.
Cat Dealers Affected by Weak Sales
Finning International, the world's largest Cat dealer located in Vancouver, Canada, posted a lower than expected quarterly profit and annouced it will cut another 500 jobs in additon to the 1,900 cut in 2015. Finning operates in Canada, Argentina, Chile, Bolivia, Ireland, and the UK. Much of Finning International's business is directly affected by mining and resources sectors.
Cat stock price has fallen 23 percent over the past year.
Source: Carl Surran, Seeking Alpha; Caterpillar