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Jordan Monroe Schultz/MEDILL/Yahoo Finance

Caterpillar stock has steadily declined since a year ago due to an unexpected decrease in mining sales.

Caterpillar profit plunges, but stock gains

by Jordan Monroe Schultz
Apr 23, 2013

Due to a staggering mining sector, Caterpillar Inc.'s profit fell abruptly, down 45 percent, underperforming analysts' already-low expectation. The company trimmed its guidance for 2013.

First-quarter profit fell to $880 million, or $1.31 per diluted share, from $1.59 billion, or $2.37 per diluted share, in the year-earlier quarter. Revenues fell to $13.21 billion from $15.98 billion.


CEO Doug Oberhelman said in a statement that Caterpillar now expects 2013 sales in a range of $57 to $61 billion, down from an earlier forecast of $60 billion to $68 billion, compared with last year's sales of $65.9 billion, and a full-year profit of about $7 per share, reduced from an earlier forecast of $7 to $9, and compared with $8.48 a year ago.

Nevertheless, after the report Monday morning, the stock rose to finish a tick higher at $82.71, up $2.28, or 2 percent. Yet, Monday’s price lagged far behind the year-ago price of $105.12, representing a 21 percent tumble.

Analyst Larry De Maria of William Blair, who has a neutral rating on CAT, believes that investors expected the company to underperform the Wall Street consensus, but now applauds the company’s reduced expectations for this year in light of the distress in mining.

“We believe the report is generally in line with investor expectations, and the guidance cut, while large, should encompass this year’s results now that mining is well provisioned for,” De Maria explained in a statement.

The company, too, expected a significant sales reduction, according to Oberhelman. In a video statement he explained that both the company and its dealers generally add inventory in the first quarter, but Cat inventories declined by nearly $500 million as production was reduced, and dealers' inventories fell by $700 million as they sold off excessive stock left over from 2012.

“Those are significant year-to-year swings, and coupled with moderating end-user demand, resulted in sales and revenues being down 17 percent,” Oberhelman said.

The manufacturer also cited a 50 percent reduction in sales of traditional Cat mining machines and a 15 percent sales reduction at Bucyrus, an Ohio firm acquired by Caterpillar in 2011.