After 3 years of double digit earnings growth, including 93% growth in 2010, it looks like Caterpillar (CAT - Analyst Report) is going to hit a wall in 2013 as earnings are expected to decline by 4.4%.
The bad news started with a 13% fourth quarter 2012 earnings miss even as the company reported record full year 2012 sales.
The world's largest construction and mining equipment maker also had the embarrassing episode of having to announce it was writing down $580 million for its purchase of Zhengzhou Siwei Mechanical & Electrical Manufacturing, which made roof-support equipment for underground coal mines, after it discovered discrepancies in the physical inventory after it closed on the deal in October 2012. It blamed "coordinated accounting misconduct" inside the Chinese company.
That acquisition had been the company's largest Asia investment since 2010.
Revenue fell to $16.08 billion from $17.24 billion in the fourth quarter of 2011 as China slowed and Europe remained mired in a recession. Inventory was lowered by $2 billion in the quarter.
How Does 2013 Look?
Caterpillar announced a huge EPS guidance range for 2013 which signals that it basically has no idea how business is going to be this year.
It expects earnings anywhere from $7.00 to $9.00. China is still expected to be weak in the first half of 2013 which leaves a second half of the year rally to revive the company's prospects. But will it?
11 estimates have come down for 2013 in the last 30 days. The 2013 Zacks Consensus has fallen to $8.25 from $8.69 a month ago. The stock has slid to a Zacks Rank #5 (Strong Sell).
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.