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Caterpillar cuts 2015 profit outlook; analyst maintains ‘hold’ advice

Updated: September 25, 2012 12:56PM

NEW YORK — A Jefferies analyst reaffirmed his “Hold” rating for Caterpillar Inc., saying that while the heavy equipment company may have lowered its sales expectations for the next few years, the revised guidance is much more reasonable given the current global economic climate.

Late Monday, Caterpillar cut its 2015 net income prediction to $12 to $18 per share from its previous prediction of $15 to $20 per share, citing slower-than-expected growth in the global economy. Revenue is projected at $80 billion to $100 billion.

The company, which released the revised outlook at a mining conference in Las Vegas, said it expects sales growth to pick up in 2014 and 2015 amid a “modest” global economic expansion.

Caterpillar also said that its dealer inventory reductions are running ahead of expectations and could result in the company’s 2012 revenue coming in about $2 billion below its previously projected range of $68 billion to $70 billion.

Its shares fell $1.57, or 1.7 percent, to $89.30 in premarket trading. They are down about 22 percent from a 52-week high of $116.95 on Feb. 24. They traded as low as $67.54 in early October 2011.

Analyst Stephen Volkmann said that while Caterpillar’s stock price will likely take a hit Tuesday on worries that inventory moves will ultimately result in a lower-than-expected 2012 earnings, the reduced 2015 prediction is more realistic than the company’s previous expectations.

“The key difference is slower global economic growth driving a slower recovery in end market sales, as Caterpillar is more convinced it will be more profitable going forward,” Volkmann wrote in a note to investors.

He also noted that the company said if global growth rates turn out to be closer to previous predictions, it might consider raising its 2015 earnings target back to the previous level.

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