Caterpillar Inc. (CAT) Reports Sharp Decline In Profits, Cuts Guidance

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Caterpillar Inc. (NYSE:CAT) released its second quarter earnings before opening bell this morning, posting profits per share of $1.45 on revenue of $14.621 billion. Profits declined 43 percent year over year to $960 million. Analysts had been expecting the company to report earnings per share of $1.70 on $14.9 billion in revenue.

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Caterpillar reports weakening demand

The maker of heavy equipment confirmed that demand for its machinery was down during the quarter. It said it faced problems in currency exchange and hedging losses, plus a $1.2 billion decline in inventory and a $1 billion in dealer machine inventory reductions. Caterpillar Inc. (NYSE:CAT) said it expects dealer machine inventory to decline again to $1 billion in the second half of this year and end the year approximately $3.5 billion lower than at the end of last year.  However, Chairman and Chief Executive Officer Doug Oberhelman said this year’s weak demand and underselling end-user demand sets the company up for better sales next year.

Chanos shorts Caterpillar

Earlier this month, well-known short-seller Jim Chanos announced that Caterpillar Inc. (NYSE:CAT) was his top short pick. He pointed to the company’s negative free cash flow after dividends, the way it handled a recent merger and unrealistic guidance. He also said the company would face soft demand in its sector this year, just as it has reported.

Caterpillar lowers 2013 guidance

Caterpillar Inc. (NYSE:CAT) announced this morning that it was lowering its guidance to reflect revenues between $56 billion and $58 billion. Profits per share are now expected to be approximately $6.50. Previous guidance called for revenue between $57 billion and $61 billion with profit per share of $7.

The company said end-user is “similar” to their previous outlook, but they have now factored in “a more significant reduction in dealer machine inventory.”

Caterpillar bought back $1 billion worth of shares

During the second quarter of the year, Caterpillar Inc. (NYSE:CAT) bought back $1 billion worth of its shares. It still has $2.7 billion of its share repurchase authorization left, which is good through December 2015. The company said it planned to repurchase $1 billion more of its shares in the third quarter.

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