Caterpillar waves another red flag

In another warning of a global slowdown, the company cuts its outlook and foresees weakness all the way through 2015.

By InvestorPlace Sep 25, 2012 11:01AM

Image, Construction, copyright Photodisc Green, Getty ImagesBy Alyssa Oursler


iplogoFirst it was FedEx (FDX), the go-to global economic bellwether, that warned of a rough road ahead when it cut expectations for first-quarter profits because of weakness in the global economy.

The next red flag? Caterpillar (CAT). The company -- considered a key measure of health for the manufacturing, mining and construction sector -- just announced that it is also expecting to suffer from global weakness -- all the way through 2015.

The company cut its earnings forecast for, yes, three years down the road and is now expecting between $12 and $18 as opposed to its original range of $15 to $20.

Why is the company looking so far ahead? Because it had already made the optimistic call for an EPS of $20 in 2015 on the heels of its acquisition of mining equipment maker Bucyrus International, the largest deal in the company's history.

And judging by the "fairly anemic and modest growth" that looks to be in store through then, CAT must have felt it was better to give investors time to digest the fact that such expectations may have been a little lofty.

Investors sent shares down just under 2% after the bell, bring the stock's year-to-date movement slightly in the red.

That's better than where it sat earlier in the summer, though. CAT was wallowing in double-digit losses around the end of July, despite the fact that the company posted an eye-popping second quarter: 21% revenue growth, 67% profit growth, an earnings per share (EPS) 26 cents better than Wall Street had been expecting and a first half that put it on track for a record-setting year.

At that point, InvestorPlace contributor Dan Burrows -- who picked Caterpillar for the site's Ten Best Stocks of 2012 contest, for which he currently sits in eighth place -- said, quite simply, that "Fear was trumping fundamentals."

While we'll have to wait until next month for the company's most recent results and updated outlook for this year, investors seem to have more of a reason to fear Caterpillar in the meantime -- and to worry about the global economic outlook as a whole.

As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.

More from InvestorPlace

Sep 25, 2012 5:30PM

And people still want to vote for obama?  Are you out of your minds?  This economy has been under obama for four years and he has done nothing but talk about raising our taxes, add hundreds of billions to our deficits, created the most anti business administration ever.  The guy has no clue on what to do.  He blames Bush still.  He blames the tsunami.  This economy is due to the terrible decisions he and his administration has made.  The shah needs to be voted out.  If obama is voted in again, our economy will go nowhere and will probably get much worse.  The only good thing obama is good for is breaking promises, lying, talking, and crushing businesses.  Go ahead.  Vote for obama is a vote for a recession. I would rather vote for a mormon than vote for a moron.

Sep 25, 2012 6:18PM
Ficaman: i'm with you, that man gets in office again the country will go to crap, no one will want to work period, depression will set in on everyone. of course now if you are the lucky SOB's that get government handouts you might party, but with everyone not working i don't think that will happen, China will send over barges of rice for all that voted for obama because the rest saved enough money to get through, i hope. nobama in november.
Sep 25, 2012 12:16PM
Sure thing, we're in a weak spot and that's why the FED did QE3. The market manipulators are searching for everything to get it down before QE3 even starts so they can then buy and wait for positive results. The manipulation is so obvious it's amazing.
Sep 25, 2012 6:16PM
I'm shocked that msn did'nt try to make light of this forecast like it did when Fedex issued it's forecast. I guess they are still working on some way to cover up for their master Obama. It's getting harder to cover up the incompetence of this president!
Sep 25, 2012 5:53PM
Trade policies are only making a small elite class globally.  Not a consumer driven economic engine.  Enough said.
Sep 25, 2012 6:14PM

cat really is going to suffer if that lam brain president and EPA shuts down the coal mining, he really is working on getting job growth, NOT. idiot


Sep 25, 2012 6:37PM
There will be a lot of Red Flags if we continue with this Piss poor runned Goverment Spending Idiots all in One Sentence
Sep 25, 2012 6:52PM
Coal mining especially strip mining is under fire from EPA plus natural gas burns 50% cleaner with no heavy metals or particulate matter. Cat sell a lot of equipment for surface mining of coal, that equipment sales may be more than anemic. It may dry up altogether if coal is replaced by natural gas for power generation.
Sep 25, 2012 9:53PM

I actually worked for Cat for a while before moving back to Automotive, and what this article doesn't include is the $2B in Warranty that they don't take seriously, Purchasing runs the show, not manufacturing, and they are so many layers and levels of management that they don't know who's on first. Anything involved with process improvement that would yield permanent corrective actions, they shoot down because the culture is to cover-up and cover-up just to keep a job. This isn't a surprise to me at all. Instead of tackling the $2B in Warranty they chose to expand exponentially in China, without improving here. And this my friends has absolutely nothing to do with Obama, the BS that Romney is trying to serve, it literally is the culture of the company. They're still floating on their 1988 championship and they need to get real and get to the root of the problem.

Sep 25, 2012 6:58PM

You guys are hilarious, Obama has so little to do with the global economy. China and Europe are getting old, so they have issues there, which is Obama's fault, and the fact that Eurozone is A mess can surely be blamed on Obama aswell, hell, lets blame China's slow down on Obama aswell.....

Fact is, we're in trouble, and Obama is "trying" to bring us A softer landing than what was in the works when he first got into office.

Now, if you think Romney, the guy who WONT tell you his tax plan, only that the devils in the details, and the angels in the policy, that should get you friggen worried....The guy has no plan, he's going to make it up depending on how the houses sit if he's elected. He will screw the middle class if given the oppurtunity (see Wisconsin and Gov. Walker). Romney would only have the benefit of getting the corperations whom just happen to be sitting on thier largest balance sheets ever to maybe hire. But I doubt that aswell, since the goal is to drive our wages down, so they can get more out of us and pay us less, and tax us more. If you do not see this agenda you are missing whats going on around you.

Sep 25, 2012 8:14PM
you Obama haters are hilarious!  the sad thing is that somebody convinced you that your viewpoint is correct!  obviously its all Obama's fault!  oh yea, and the environment, and NAFTA- you right wing nuts always forget that business' only reason for being in existence is profit margin-  and then you defend big business (Romney/Koch/Murdoch2012) as if they are concerned with you or your family's well being!  you think jobs are outsourced to Asia for the cheep labor? ha! try 2 billion up & coming lower middle class consumers and lower transport costs (if you make it in Asia, you don't have to ship it to Asia to sell it in Asia) = higher margins!  companies that hide revenue to avoid US tax (apple, Bane, exxon)  don't  care about civilians or nationalities!  you idiots are all just potential sources of revenue, and it is far cheaper to influence an election than to develop the next technology that might help humanity.    Just ask (standard oil)Exxon or the Koch brothers (worth 70 billion?) why solar panels are such a bad idea. 
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