During its Analyst Call yesterday, Caterpillar Inc. (CAT) reiterated its 2009 forecast and provided a five year outlook.
The company expects full-year revenues in the range of $32–$36 billion. EPS is forecasted between $1.15 and $2.25, excluding redundancy costs of $0.75 per share. The Zacks Consensus Estimate is pegged at $1.50 per share.
Given the need for basic infrastructure globally, Caterpillar is confident of benefiting from economic recovery. The company expects to achieve earnings of $8–$10 per share on sales of nearly $60 billion by 2012.
The company said that it is well-positioned to generate annual profits of about $2.50 per share even if the recession continues. The company has implemented plans to cut down costs and remain profitable in a recessionary environment. The company aims to reduce SG&A and R&D costs by 15% in 2009.
The company’s outlook takes into account government stimulus plans, especially in China. According to the company, there was an improvement in industrial production growth and increase in commercial and residential building sales in China. By 2012, the company aims to achieve sales of over $4 billion from China.
Furthermore, the company’s forecast takes into account the growing benefits from Caterpillar Production System (CPS). By implementing the CPS, the company will transform its manufacturing systems to new standards of quality, speed, and safety in the industry. Inventory management is a key element of the CPS.
The company reduced inventory by $1.6 billion in the first six months of 2009 and expects to reduce it by $3 billion in the full year. Implementation of CPS by 2010 is expected to improve the company’s long-term profitability.
We see a continued challenging backdrop for Caterpillar for the next couple of quarters. However, over the long-term, we expect the company to benefit immensely from the growing need for infrastructure development in both the developing and developed nations.
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