Caterpillar (NYSE:CAT) investors were in for a rude shock when the heavy-equipment manufacturer recently slashed its forward guidance. In addition, Caterpillar announced a slew of restructuring initiatives that point to tougher times ahead.
Caterpillar cut its 2015 revenue guidance by $1 billion to $48 billion while guiding 2016 revenue down another 5%. To give investors an idea of how challenging business conditions really are, and how far a turnaround could still be, Caterpillar announced plans to lay off as many as 10,000 workers, or nearly 9% of its workforce, over the next three years.
The news was a significant blow, especially after the pain that Caterpillar investors have endured over the past year.
What's worrisome is that the bad news could spill over to other industrial companies, especially those operating in areas that Caterpillar warned about. Caterpillar is seeing "broadly weaker business conditions" across all its business segments -- Construction Industries, Energy and Transportation, and Resource Industries. Management further elaborated: "[M]ining equipment sales are far below the prior peak and are substantially below what we would consider a reasonable replacement level. Oil and gas has declined substantially as a result of lower oil prices, and construction equipment sales are well below prior peaks in North America, Latin America, Europe, Africa, the Middle East and, Asia-Pacific."
In short, any company that serves the worldwide mining, construction, and/or oil and gas markets is likely to find itself in hot water. Companies that I believe investors should watch are Joy Global (NYSE:JOY), Manitowoc (NYSE:MTW), Cummins (NYSE:CMI), and United Rentals (NYSE:URI). Find out in the following slideshow why these companies could take a hit, including where they currently stand, to give you an idea about how bad an outlook downgrade could be.