This Is Caterpillar's Forecast for The World Economy

Caterpillar sees world GDP at 2.7 percent

Breaking Down Caterpillar’s Earnings Forecast

Caterpillar, the maker of construction and mining equipment, came out with earnings this morning that topped analyst expectations, thanks in part to solid sales in North America.

The company is famous for giving a detailed assessment about the state of the world economy along with its financial reports.

Here's the latest assessment from the company. The company is forecasting global GDP growth for 2015 of 2.7 percent, up from 2.6 percent in 2014. Among the risks Caterpillar continues to see: Structural reform in China and uncertain monetary and fiscal policy in the United States.

2015 Outlook

Overall, our view of world economic growth in 2015 is about the same as we expected in the outlook provided with our 2014 year-end financial release in January of 2015.  We expect world GDP growth in 2015 of about 2.7 percent, up from about 2.6 percent in 2014.  We expect that the improvement will come from developed countries and that economies in developing countries will, overall, grow at a rate slightly below their growth rate in 2014.

Despite our outlook for modest improvement in global economic growth versus 2014, significant risks and uncertainties remain that could temper growth in 2015.  Political conflicts and social unrest continue to disrupt economic activity in several regions; in particular, the Commonwealth of Independent States, Africa and the Middle East.  The Chinese government's push for structural reforms is slowing growth, and the ongoing uncertainty around the direction and timing of U.S. fiscal and monetary policy actions may temper business confidence.

The outlook for sales and revenues remains unchanged at about $50 billion for 2015, down from $55.2 billion in 2014.  The primary factors contributing to the decline from 2014 are largely the same as we expected three months ago:

  • Lower oil prices are expected to negatively impact sales of reciprocating engines within Energy & Transportation and Construction Industries' sales in oil-producing countries around the world, including regions of the United States that rely on oil revenues to drive economic growth;
  • The currency translation impact of a stronger U.S. dollar on our sales outside the United States;
  • Weaker mining sales;
  • Lower sales in our rail business, primarily for locomotives; and
  • Lower sales in China, primarily for construction equipment.

While the outlook for sales and revenues is unchanged, our expectation for profit has improved.  We now expect that 2015 profit per share will be $4.70, or $5.00 per share excluding restructuring costs.  The previous outlook for 2015 profit per share was $4.60, or $4.75 excluding restructuring costs.  The expectation for 2015 restructuring costs is now about $250 million—about $100 million more than the previous outlook with the increase primarily related to facilities that produce mining products.  Profit per share in 2014 was $5.88, or $6.38 excluding restructuring costs.

For more from the earnings release, see here.

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