Sluggish Global Sales Damp U.S. Earnings From Caterpillar to 3M

Sluggish international markets are damping earnings at U.S. industrials giants.

Caterpillar Inc., the largest manufacturer of construction and mining machinery, cut its full-year sales forecast Thursday, saying important end-user industries remain weak. 3M Co. reduced the top end of its 2015 profit and revenue, citing lower-than-expected global economic growth.

The earnings season has been spotty for U.S. companies so far. Earnings per share at Standard & Poor’s 500 Index companies probably slumped 5.3 percent in the second quarter, according to analysts’ estimates, weighed down by tumbling oil and commodities prices and slow global economic growth. Excluding the energy industry, S&P 500 profits rose just 1.5 percent, analysts estimate.

That’s not to say there haven’t been bright spots. General Motors Co.’s second-quarter net income beat predictions by a wide margin, fueled by strength in China and in the U.S. GM’s results, which sent the shares up as much as 7.9 percent, signalled that the Chinese consumer is still showing buying power.

Caterpillar is selling fewer of its signature yellow diggers and dump trucks to miners amid the deepening slump in prices for copper, coal and iron ore. Sales of engines and generators to the energy industry also have been hurt by the slide in oil and natural gas prices. There’s no end in sight, with the Bloomberg Commodity Index falling this week to a 13-year low.

“While economic conditions in the United States are modestly positive, the global economy remains relatively stagnant,” Caterpillar Chief Executive Officer Doug Oberhelman said in a statement. “Many of the key industries we serve remain weak, and we haven’t seen sustained signs of improvement.”

The shares slipped as much as 3.4 percent, while 3M, the St. Paul, Minnesota-based maker of safety equipment and Post-it Notes, dropped as much as 3.1 percent.

McDonald’s, Drugmakers

At the same time, cheap oil and natural gas is benefiting industries that use it as raw material. Dow Chemical Co., the largest U.S. chemical maker by revenue, said its plastics business posted record profit on lower material costs. And low gasoline prices at the pump have helped spurred sales of profitable pickups and sport utility vehicles in the U.S., where GM is the market leader.

McDonald’s Corp., under new CEO Steve Easterbrook, predicted a return to growth for the burger chain in the second half of the year after reporting a decline in second-quarter global same-store sales -- which measure locations open at least 13 months. Easterbrook, a longtime McDonald’s executive who was elevated to the top job in March, is working on a turnaround plan to revive sales.

Also reporting today were Philadelphia-based Comcast Corp., the owner of the Universal film studios, and Imax Corp., the operator of large-screen cinemas. Results at both companies were boosted by the blockbusters “Jurassic World” and “Furious 7.”

Bristol-Myers Squibb Co. raised its full-year forecast, a signal that its bet on cancer drugs powered by the immune system is paying off. Valeant Pharmaceuticals International Inc. also boosted its 2015 profit forecast, helped by a newly acquired treatment for a digestive condition. Inc., AT&T Inc. and Starbucks Corp. are scheduled to report after the close Thursday.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE