) shares dipped 0.18% following its announcement of an 8% decline
in global retail sales for the three months ending Feb 2013, with
sales dropping in all regions, barring North America. The drop
however remains flat compared with January but marks the 15th
month of declining sales for the construction and mining
Prior to this, Caterpillar had witnessed a 20-month stretch of
negative sales from Sep 2008 to Apr 2010 due to the global
recession. In May 2010, the company reverted to sales growth and
there was no looking back as sales picked up on strong equipment
demand both domestically as well as in emerging markets.
However, sales started declining since Dec 2012, affected by
tougher year-earlier comparisons, rising inventories of unsold
equipment, weak economic conditions, and slowing down of the
Chinese economy, which had earlier been the main driver of
construction and mining demand.
In 2013, the monthly sales decline rate ranged from 4% to 13%.
North America, Caterpillar's largest market in terms of
geography, fared better with a 2% increase in February. Sales in
Latin America dropped 16% in November. The region had enjoyed a
10-month stint of growth, which abruptly ended in Jul 2013.
Asia dragged down overall results with a 17% decline while
sales in Europe, Africa and the Middle East (EAME) declined 9%.
Sales in ROW (Rest of the World) dipped 8%.
Sales in the Resource Industries segment plunged 37% in
February, as sales dipped across all regions. Asia/Pacific fared
the worst with a 55% slump, followed by Latin America, North
America and EAME with respective declines of 49%, 24% and 19%.
This does not come as a surprise as sales in Resource Industries
will continue to be affected as mining companies keep reducing
their capital expenditures in 2014.
Sales in Construction Industries was the bright spot, increasing
9%, triggered by increase in all regions except EAME. Latin
America outperformed the other regions with a 16% climb, followed
by North America (up 13%) and Asia Pacific (up 11%). EAME sales
Sales in the Energy & Transportation segment edged up 2%.
A 28% increase in sales in the Industrial sector and a 17% in the
Power generation sector was offset by a 10% decline in sales in
the transportation and Oil & Gas sectors.
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Caterpillar had earlier announced plans to change its
organization of dealerships. It will now focus on 10 metrics and
underperforming dealerships will be subject to a strategy
discussion and development of a plan to perk the performance up
to a targeted level. Through this drive, Caterpillar expects to
improve revenues at the dealer level by $9 billion to $18 billion
over the next 4 years.
Caterpillar expects revenues in 2014 to remain flat with 2013 or
move up or down in a 5% range, and earnings per share at $5.85
per share, reflecting 2% annual growth. Construction Industries
and Power Systems revenues are expected to deliver sales growth,
driven by better economic development. Caterpillar will also
benefit from the recovery in the construction sector and
macroeconomic stabilization in Europe. Management also expects a
number of smaller acquisitions in 2014, in its Energy &
Caterpillar has initiated extensive cost-saving programs across
its global businesses. The company will continue to benefit from
its additional restructuring actions in 2014 to optimize its cost
structure and improve its operational efficiency. Even though
extensive restructuring actions have long-term benefits, they
will impact profitability in 2014.
Caterpillar currently retains a Zacks Rank #3 (Hold). Some
better-ranked stocks that are worth considering in this sector
The Manitowoc Co., Inc.
Alamo Group, Inc.
), both of which carry a Zacks Rank #2 (Buy).