Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Caterpillar Cuts Jobs Amid Global Slowdown

Heavy-equipment maker Caterpillar (NYSE: CAT  ) was one of only two stocks in the Dow Jones Industrial Average to not record any gains in the first quarter. With a need to align its production to global demand, it will be cutting as many as 300 jobs at one South Milwaukee factory, or 40% of its workforce that builds its mining equipment there.

That the company also begins contract negotiations next week with the United Steelworkers union that represents the workers there was lost on no one, yet the equipment maker says it's not a negotiating tactic.

Earlier this year its fourth-quarter profits were more than cut in half, falling to $697 million from $1.5 billion, as revenues tumbled almost 7%. More damaging, though, was having to write off $580 million in goodwill related to an acquisition it made in China that went awry amid an accounting scandal. Last month it reported global retail machine sales fell 13% during a three-month period ended in February as sales in the Asia-Pacific region plummeted 26%. With fourth-quarter construction revenues down 32%, and off an average 23% everywhere else in the world, Caterpillar really has few choices but to cut jobs.

Other construction equipment makers like Deere (NYSE: DE  ) and Joy Global (NYSE: JOY  ) have also pulled back sharply from their recent highs, with the former falling 11% and the latter down 24%. In fact, Joy Global announced its own restructuring at the end of last year that included layoffs and facility consolidation that it said would require it to take a $25 million charge this year.

With the Institute for Supply Management's manufacturing index offering up a weak outlook for the future and China's own economy facing a slowdown, coal demand has been slack and miners are seeing their shares sell off. The need for mining equipment is falling as result. 

Caterpillar's stock is down 21% from its 52-week high and it trades at nine times estimates and less than its projected growth rate. It seems to me Caterpillar may prove to be a good turnaround play at this price.

Caterpillar is the market share leader in an industry in which size matters, and its quality products, extensive service network, and unparalleled brand strength combine to give it solid competitive advantages. Read all about Caterpillar's strengths and weaknesses in The Motley Fool's brand-new report. Just click here to access it now.

Read/Post Comments (2) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2342277, ~/Articles/ArticleHandler.aspx, 9/26/2016 5:23:13 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:00 PM
CAT $82.44 Down -1.06 -1.27%
Caterpillar CAPS Rating: ***
DE $83.34 Down -0.82 -0.97%
John Deere CAPS Rating: ***
JOY $27.59 Down -0.14 -0.50%
Joy Global CAPS Rating: ***