Caterpillar Slashes Staff to Cut Costs

Following its conference-call revelation that Caterpillar (NYSE: CAT  ) was on a "cost lockdown binge," the heavy equipment manufacturer is now shedding more operations, announcing it will be closing its Pulaski, Va. mining equipment facility and consolidating its operations with one it has in Pennsylvania.

The Pulaski operations and subsequent loss of 240 jobs are the third to make the move to Houston, Penn. this year, with production from its Tazewell, Va. making the shift early on and Beckley, W.Va. following it there by mid-2014.

The latest closure comes on the heels of its Oct. 29 announcement that Caterpillar was closing the former Bucyrus International manufacturing operations in Kilgore, Texas by the end of the year, while also closing facilities near Toronto and Sudbury, Canada; Summerville, S.C.; and Owatonna, Minn.

Overall, Cat has slashed its employment rolls by 13,000 people as the global drop in demand for mining equipment forces the equipment maker to resort to temporary layoffs and permanent plant closures.

Earlier this year, Joy Global (NYSE: JOY  ) said all of its operations were under review because of a "very significant" change in outlook in the Americas, where a number of coal mine site closures have upended the industry. It forecast that revenues could tumble another 20% next year as orders plunged 36% and prices in industrial metals and bulk commodities fell between 20% and 40%.

These are the two major mining equipment manufacturers, and their dreary outlook and response is driving results in areas investors might not expect. Ritchie Bros. Auctioneers (NYSE: RBA  ) , the world's largest auctioneer of industrial, construction, and agricultural machinery and equipment, reported third-quarter results earlier this month showing GAAP earnings doubling year over year. Even on an adjusted basis, those earnings were 65% higher.

Although its gross auction proceeds shrank 7% from last year to almost $790 million, that had more to do with a single, large consignment in the year ago period than a less conducive environment this time around. Over the first nine months of 2013, Richie Bros. Auctioneers sold more than $987 million of equipment, trucks, and other assets to online buyers alone, which represented 36% of its gross auction proceeds. And just last month, the auctioneer reported it held its largest two-day event, breaking all sorts of company records as more than 5,850 equipment items and trucks were sold in the public auction for more than $90 million.

If you're looking for a way to profit from the collapse of the mining industry as China's economy cools, coal continues its retreat in the U.S. and Australia, and commodity prices tumble, industrial auctions might be the way to go. Caterpillar's cost-cutting program is not over, as it continually adjusts to worsening conditions in the market. It's already twice revamped its outlook for the year and there doesn't appear to be any catalysts for improvement for the immediate future.

The heavy equipment maker had hoped 2013 would be the year things would turn around after last year's poor performance, but recovery has been pushed out to 2014 and beyond. But with Caterpillar's stock trading at just 14 times estimated earnings and at less than its sales, I think the worst of the malaise has been priced in. I find Caterpillar's current lows an interesting level at which to consider it as an investment.

Dig deep for value
Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

Read/Post Comments (0) | Recommend This Article (2)

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.

Be the first one to comment on this article.

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: 2733033, ~/Articles/ArticleHandler.aspx, 5/25/2016 11:00:34 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...

Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


Today's Market

updated Moments ago Sponsored by:
DOW 17,859.97 153.92 0.87%
S&P 500 2,090.56 14.50 0.70%
NASD 4,894.85 33.80 0.70%

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

5/25/2016 10:43 AM
CAT $71.88 Up +0.79 +1.11%
Caterpillar, Inc. CAPS Rating: ***
JOY $16.81 Up +0.45 +2.75%
Joy Global, Inc. CAPS Rating: ****
RBA $33.06 Up +0.40 +1.22%
Ritchie Bros. Auct… CAPS Rating: *****