) sales slumped for the eighth consecutive month as worldwide
sales declined 9% for the three months ending Jul 2013. The news
dragged the shares of the construction and mining equipment
behemoth down 0.4%.
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The Caterpillar sales graph has been trending lower since Dec
2012, hurt by tougher year-earlier comparisons and rising
inventories of unsold equipment. Caterpillar had earlier
witnessed negative sales growth in Apr 2010 and since then
enjoyed a stint of positive growth, benefiting from strong
equipment demand both domestically as well as in the emerging
So far in 2013, Caterpillar's sales declined 4% in January, which
deteriorated to 13% in February and 11% in March. The narrower
decline of 7% in May sparked some hopes, but it was short-lived
as it widened to a fall of 8% in Jun and 9% in July.
In July, Caterpillar witnessed declines across all regions
barring Latin America, which was an outperformer with an 11%
hike. Demand for construction and infrastructure projects has
spurred equipment demand in Brazil as it prepares for the 2014
World Cup and 2016 Olympic Games.
In North America, the company's largest market in terms of
geography, the sales decline of 1% in July has improved from the
nadir of an 18% decline in April. In Asia, sales declined 28%,
the worst performance so far in the year, pulled down by weak
demand from China. Sales in EAME were also at its worst in 2013
with a 12% drop compared to single-digit declines in the
preceding five months and the 1% climb in January. Sales in ROW
(Rest of the World) dipped 13%.
Reciprocating & Turbine Engine Retail sales remained flat
year over year globally, a disappointment from the 1% improvement
in June. Among the end markets, sales to the transportation
sector registered the highest increase so far in the year with a
22% climb. Sales to the industrial markets increased 9% and to
the electric power markets increased 5%. The petroleum market
however remained in the red with sales dipping 15%.
Caterpillar's second quarter results were also disappointing as
revenues dipped 16% year over year to $14.6 billion and earnings
per share slumped 43% to $1.45, primarily due to reduced mining
demand and decline in inventory. Citing continued dealer machine
inventory reductions during 2013, Caterpillar has trimmed its
sales outlook to a range of $56 billion to $58 billion from the
previous $57 billion to $61 billion. Caterpillar expects dealers
to reduce inventory by about $3.5 billion in 2013. Caterpillar
now expects to earn $6.50 per share in 2013, down from the
earlier projection of $7.00 per share.
Even though Caterpillar will benefit from the recovery in the
U.S. construction sector, the recent loss of sales momentum,
declining backlog, negative impact of the European debt crisis
and slowdown in economic growth in China remain concerns.
Caterpillar currently retains a Zacks Rank #3 (Hold). Other
stocks in the industrial products sector with a favorable Zacks
Alamo Group, Inc.
) with a Zacks Rank #1 (Strong Buy), and
CNH Global NV
) with a Zacks Rank #2 (Buy).