Caterpillar Posts Weak Fourth Quarter, Record Sales and Profits for 2012

Andrew Klips  |

After strong starts in both 2011 and 2012, Caterpillar Inc. (CAT) warned Monday morning that 2013 may not be quite as stellar.  The world’s largest maker of mining and construction equipment delivered the comments amongst its earnings report for the fourth quarter and full year 2012.

On the upside, the Peoria, Illinois-based company still notched record sales and profits during the year.

Net income during the last quarter dropped 55 percent to $697 million, or $1.04 per share, on lower sales and a $580 million, or 87 cents per share, write-down for the acquisition of a Chinese mining equipment company.  In the year prior quarter, Caterpillar reported $1.55 billion in profit, or $2.32 per share.  Excluding one-time items, profit totaled $1.46 per share.  Fourth-quarter revenue was $16.08 billion, 7 percent lower than the year earlier quarter.

The revenue figure beat Wall Street expectations of about $16 billion, but the earnings figure came up shy of the $1.69 per share that analysts predicted.

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Cat is investigating the acquisition expense for buying ERA Mining Machinery Ltd. , the parent company of Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., known as “Siwei,” that led to the large write-down because of accounting misconduct on the part of Siwei.  “The actions of the individuals involved were clearly wrong and purposely designed to overstate the profitability of the company prior to our acquisition,” the company said in today’s statement.

Caterpiller bought ERA last June for about $700 million.

For the full year, Caterpillar reported record revenues of $65.875 billion, an increase of 10 percent from $60.138 billion in 2011. Profit per share of $8.48 was also an all-time record, including the impact of the goodwill impairment charge of $0.87 per share related to Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., known as Siwei. The 2012 profit per share of $8.48 was up 15 percent from $7.40 in 2011. Profit was $5.681 billion, an increase of 15 percent from $4.928 billion in 2011.

Shares initially rose this morning, but quickly pulled-back as investors digested Caterpillar’s “cautious” guidance for the year, amid tight global economies.

Cat guided profit between $7 and $9 per share and revenue in the range of $60 to $68 billion.  Analysts were expecting earnings of $8.54 per share and revenue of $65.2 billion.

"While we expect some improvement in the U.S. economy, growth is expected to be relatively weak," said Caterpillar Chairman and Chief Executive Doug Oberhelman.

The company added that it cut its inventory by $2 billion in the fourth quarter and slowed production to remain in sync with lower demand.

Shares printed as high as $98.74 just after the opening bell, but have slipped back under $97 since to moderate early gains to around 1 percent for the day.  Shares of CAT haven’t traded above $98 each since last May.

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