The construction and mining equipment maker Caterpillar Inc. (NYSE:CAT) posted lower than expected first quarter results today. The Peoria, Illinois-based company earned a net profit of $880 million or $1.31 per share, down 45 percent  from 1Q 2012. Revenues also declined 17 percent to $13.2 billion. Analysts were expecting $13.69 billion in revenues and $1.39 in EPS. Following the weak results, the company lowered its outlook for the full year.

Caterpillar Logo

Caterpillar Inc. (NYSE:CAT) chairman and CEO Doug Oberhelman said that he had already indicated during the 4Q 2012 earnings announcement that  the first quarter would prove challenging for the company. Oberhelman said that he is pleased with the company’s performance, especially considering the decline in the market.

It was the second tough consecutive quarter for the company, as its fourth quarter earnings were also down 55 percent due to charges related to an accounting fraud at its Chinese subsidiary. In the first quarter, revenues were hit by an 11 percent decline in international retail machine sales. The shale gas boom in the United States has lowered the natural gas prices, so power producers are increasingly switching from coal to natural gas. Additionally, slowing industrial production in China has lowered the demand for mining equipment in the world’s second largest economy.

The company and its dealers usually accumulate inventory in the first quarter every year to prepare for the big spring and summer sales. But this year, Caterpillar Inc. (NYSE:CAT) reduced its inventory by $500 million and dealers cut the inventory by about $700 million.

The company lowered its full year outlook to $7 per share in earnings and $57 billion to $61 billion in revenues. Caterpillar Inc. (NYSE:CAT) had earlier estimated a revenue of $60 billion to $68 billion and full-year EPS of $7-$9 per share. Earlier this month, Caterpillar announced to cut 2,000 jobs, of which 460 will be laid off from its Illinois plant.

Bank of America Merrill Lynch said in a research report, that dealer sales remained weak throughout the quarter. Dealer sales declined 4 percent in January, 13 percent in February and 11 percent in March, which reflected in the company’s earnings. The traditional mining equipment sales are expected to decline 50 percent, while the sales from its recent acquisition Bucyrus will decline 15 percent through this year. Bank of America has a Neutral rating on the stock with $95 price target.

Caterpillar Inc. (NYSE:CAT) shares were up 0.19 percent to $80.58 at 10:20 AM EDT.