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Caterpillar warns global economic tremors will curb sales

Jonathan Garber

Caterpillar reported declining revenue at the end of last year and forecast lower 2020 profit than expected as user demand remains weak amid global economic worries fueled partly by the U.S. trade battle with China.

The Deerfield, Illinois-based equipment maker earned $1.1 billion, or $1.97 a share, as sales fell 8.4 percent year-over-year to $13.1 billion, trailing Wall Street projections. Excluding items such as pension-plan losses and tax-reform impact, earnings amounted to $2.63 a share, topping the $2.38 average estimate from analysts surveyed by Refinitiv.

For the full year, Caterpillar earned $10.74 a share as revenue fell 2 percent from a year earlier to $53.8 billion.

“We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inventories," Caterpillar CEO Jim Umpleby said in a statement.

Caterpillar's construction industries business, which accounts for about 38 percent of sales, saw revenue fall by 12 percent from a year ago to $5.02 billion as dealers stocked less equipment and fewer pieces of machinery were sold. Sales were also impacted by "unfavorable price realization."

Meanwhile, sales at Caterpillar's energy and transportation unit, which makes up 45 percent of revenue, slid 5 percent year-over-year to $5.95 billion. The decline was precipitated by a 23 percent drop in inter-segment engine sales.

Looking ahead, Caterpillar sees full-year 2020 earnings of $8.50 to $10 per share, missing the $10.68 that analysts surveyed by Refinitiv were expecting.

Caterpillar shares fell 8.3 percent this year through Thursday, underperforming the S&P 500's 1.6 percent gain.

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