Caterpillar Inc. reported higher-than-expected second-quarter earnings on Thursday but said sales fell as a continued slump in the global mining industry offset a rebound in the North American building sector.
The stock fell 2.7 percent to $105.40 in early trade.
The company, the world's largest maker of earth-moving equipment, raised its full-year profit outlook to $5.75 a share, from $5.55 a share. The outlook was lifted, in part, by a $2.5 billion stock repurchase it said it would make during the current quarter.
But Caterpillar, which had forecast full-year sales in the range of $53.2 billion to $58.8 billion, adjusted its outlook lower to a range of $54 billion to $56 billion.
It said the change reflected weak construction sales in once fast-growing markets including China, the former Soviet republics and the Africa-Middle East region.
Second-quarter sales in Latin America fell 16 percent, "primarily due to lower end-user demand for mining equipment."
Ann Duignan, an analyst at JPMorgan, said the selloff reflected investor concerns about "growing macro headwinds" in emerging markets as well as unease with the new earnings-per-share forecast, which she said was only 20 cents higher "despite a 17 cent beat in Q2 and a 9 cent positive impact from share repurchases in Q3."
Caterpillar reported earnings of $999 million, or $1.57 a share, in the second quarter, up from $960 million, or $1.45 a share, last year.
The Peoria, Illinois-based company, which also makes railroad locomotives as well as diesel and turbine engines, said sales fell 3 percent to $14.15 billion.
Analysts, on average, expected a profit of $1.52 a share on sales of $14.4 billion, according to Reuters estimates.
In North America, second-quarter sales increased 6 percent, primarily due to improving demand for construction equipment in the United States.
Sales of mining equipment, which have been in a multiyear decline, fell 29 percent during the quarter, offsetting an 11 percent increase in construction equipment.
The company said profitability was also helped by a decrease in manufacturing costs - down $110 million in the quarter, thanks partly to lower material costs.
The company also said it pared its payrolls by more than 7,000 workers year over year - about 6 percent of its workforce.
Kwame Webb, an analyst at Morningstar, pointed out while Caterpillar's full-time workforce contracted year over year, its so-called "flexible workforce" of temporary and contract employees, grew by nearly 400.
He said that "seems reflective of the strategy to make the business model more variable over time."
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