Shares for machinery manufacturer Caterpillar (CAT) have risen to as much as $83 on Monday before pulling back slightly to a gain of 2.25 percent, or $82.23 per share, after the company announced the resumption of a $1 billion share buyback plan for the second quarter of 2013.
The company announced the plan as it reported earnings for the first quarter that fell significantly short of expectations. The world’s largest producer of mining equipment made profits of $880 million, or $0.31 per share on revenue of $13.2 billion, down from the prior-year period during which the company made $1.59 billion in profits, or $2.37 per share on revenue of $16 billion. Analyst estimates had earnings at $13.7 billion, or $1.38 per share.
Furthermore, for 2013 the company lowered its own forecast, cutting profit projections of $7 to $9 per share down to $7 per share, and sales from $60 to $68 billion down to $57 to $61 billion.
The much weaker earnings outlook is the result of a number of unfavorable global economic factors, most pressingly after the price of commodities, and especially metals, has taken huge losses over the last few weeks, and demand from China is lower as the country’s economy is set to grow slower than expected in 2013.
Caterpillar expects this year’s sales of mining equipment to take a 50 percent hit, especially for recent acquisitions such as China’s ERA Mining Machinery Ltd, which was purchased last year and has already seen a lag in production.
Still, company CFO Brad Halverson said, on the company’s website that while he sees the rest of 2013 as a challenge, he remains “very positive on the mining industry for the long term”.
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