Not a lot went right for Caterpillar (NYSE: CAT ) in the third quarter. Revenue was down 18.4% to $13.4 billion as demand for mining equipment around the world slumped and net income dropped 44.3% to $946 million, or $1.45 per share in results reported this morning.
Management has been surprised by the slow pickup in mining equipment sales throughout the year and that's why results have been consistently below expectations. In today's release, they reduced full-year outlook to earnings per share of $5.50 on $55 billion in revenue versus a previous expectation of $6.50 per share on $56 billion to $58 billion in revenue. Coming into the year, management expected $60 billion to $68 billion in revenue and earnings per share of $7 to $9, so it's been a fast, hard fall for investor expectations.
Orders for mining equipment in the Asia/Pacific region were down 63%, the biggest impact in a disappointing quarter. Miners are cutting down on orders around the globe but emerging markets have been hit more than others. This puts a damper on growth potential for Caterpillar and is why the company is only expecting revenue to be flat next year.
Coming out of the recession, there was pent-up demand for Caterpillar's equipment and when combined with high prices for commodities like oil, gold, and copper, demand soared. But with the global economy growing at a snail's pace, the company is probably seeing a more normalized level of demand this year. That will take some adjustment, but Caterpillar has seen demand fluctuations like this before.
Caterpillar has already been shutting factories and cut its workforce by some 13,000 people, and temporarily laid off thousands of salaried workers. It said it has also cut its capital spending plans for the year.
-- Material from The Associated Press was used in this report.