Caterpillar on Tuesday said its fourth-quarter earnings fell 25 percent, missing analysts’ expectations as the company continues to deal with declining demand for its mining equipment.
Caterpillar said it is facing a tough 2015 as sales are expected to continue to fall for a third consecutive year because of slow growth in the world economy and a decline in commodity prices, particularly copper, coal, iron ore and oil.
Oil prices, which have fallen more than 50 percent since summer, are expected to affect sales in Caterpillar’s $22 billion energy and transportation segment, which includes engines, turbines and pressure pumps for well servicing. About a third of those sales are directly tied to oil and gas operations.
Caterpillar said low oil prices also will take a bite out of construction and locomotive sales, which have been a bright spot in North America thanks to the hydraulic-fracturing boom that’s now slowing.
Caterpillar lowered its outlook for 2015, saying it expects full-year profit of $4.60 per share on revenue of about $50 billion. It had previously forecast revenue to be flat to up slightly from 2014. On Tuesday, it reported 2014 profit of $5.88 per share on revenue of $55.18 billion.
Caterpillar CEO Doug Oberhelman said in a call with analysts that the company has “pretty well” managed the ups and downs of mining “and that’s what we would commit to if we have to go further down or if we get lucky and (the oil and gas cycle) goes up.”
The company said it will continue to cut costs to weather lower sales of mining and construction equipment. It has already shed more than 12,000 jobs worldwide.
Earlier this month, Caterpillar said it will decide by March whether to send production of hydraulic components from a plant in Joliet, Ill., to Monterrey, Mexico, a decision that would cost 230 production employees their jobs. Caterpillar said it expects to spend $150 million in restructuring costs in 2015.
Profit in the quarter ended Dec. 31 fell to $757 million, or $1.23 per share, from $1 billion, or $1.54 per share, in the same period a year earlier. Revenue fell by about 1 percent to $14.24 billion.
Excluding restructuring costs, fourth-quarter profit per share was $1.35. Analysts expected earnings without those costs of $1.55 per share on revenue of $14.18 billion, according to Factset.