Caterpillar, John Deere to Layoff Employees

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Caterpillar Inc. slashed its 2015 revenue forecast on Thursday and said it will cut as many as 10,000 jobs through 2018, joining a list of big U.S. industrial companies grappling with the mining and energy downturn. 

Shares of Caterpillar tumbled as much as 8 percent to a five-year low, pulling down the sector and knocking as much as 37 points off the Dow Jones industrial average. 

Over the past year, miners and energy companies have chopped budgets and put expansion projects on hold as prices of raw materials such as crude oil, copper, coal and iron ore have plunged to six-year lows amid lingering worries about oversupplies and China's slowing economic growth. As a result, orders for equipment have dried up. 

Peoria, Illinois-based Caterpillar, the world's biggest construction and mining equipment maker, has also been hit by a slowdown in industrial activity in China. 

S&P Capital IQ analyst Jim Corridore termed the restructuring “a strong reaction” to market conditions. 

“The company has shown a lack of revenue growth in the last few years (and) earnings are in a decline,” he said. “That definitely puts pressure on the CEO to find a way to react to the environment, which at this time shows no near-term catalyst for improvement.” 

Earlier this month, mining equipment maker Joy Global Inc issued a profit warning as it struggled to adapt to slowing demand for its services. 

Deere & Co, the world's largest maker of farm equipment, announced layoffs of more than 900 plant employees in January as declining grain prices have hurt demand for agricultural machinery.  An additional 180 employees were laid-off in September.   

Caterpillar had raised its 2015 profit forecast in April and affirmed it in July. 

“That they had hung in with their guidance for so long was probably the most surprising, given the … accumulating evidence around them that things were slowing,” said Morningstar analyst Kwame Webb. 

Caterpillar expects revenue to fall in 2015 for the third straight year, to $48 billion, below the average analyst estimate of $48.82 billion, as compiled by Thomson Reuters I/B/E/S. 

 

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Source:  Reuters

 

image courtesy of Blanchard Machinery


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