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Caterpillar profit warning
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March 12, 1999: 12:30 p.m. ET
Heavy-equipment maker to miss forecasts; stock sinks, hurting Dow
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NEW YORK (CNNfn) - Caterpillar Inc. said Friday it will miss Wall Street's first-quarter earnings forecasts because of sluggish heavy-machinery sales, sending its stock into a nose dive and slowing the Dow's advance on 10,000.
The world's biggest maker of tractors and earth-moving gear said it will cut jobs and production to cope with slower sales, but gave no details on the cost-cutting measures. Officials at Caterpillar, which employs almost 60,000 people, were not available for comment.
Caterpillar said it will miss analysts' forecasts of 84 cents a share for the quarter by 50 percent. Citing weak demand from key customers and economic turmoil in Brazil and elsewhere in Latin America, it said earnings per share for the full year could fall as much as 15 percent. In 1998, the company earned $1.5 billion, or $4.11 a diluted share, on record sales of $20.98 billion.
The weak overseas demand comes on top of stiff competition at home, the company said. "While demand in the U.S. is strong, the competitive pricing environment continues," it said in a statement.
The warning sent a chill across Wall Street. Caterpillar, one of 30 stocks in the Dow Jones industrial average, tumbled 4-7/8 to 46, a drop of 9.6 percent.
The drop, as well as weakness in the technology sector, helped pull the broader market lower. The decline in Caterpillar alone was equal to a drop of about 22 points in the Dow Jones industrial average, according to published figures. The Dow was off about 11 points at 9,887 at mid-session.
Some analysts have said Caterpillar (CAT), Deere (DE) and other companies heavily dependent on exports could have a weak 1999 because of slack demand not only in Asia but in Europe, where demand is slowing, and in Latin America.
Caterpillar, based in Peoria, Ill., expects 1999 sales "slightly below" 1998's record. The company expects a stronger second half compared to the first half of 1999.
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Caterpillar Inc.
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