Caterpillar Becomes the Latest Corporate to Give Grim Forecast
The latest corporate to indicate towards weak global economy is the American engine and machinery manufacturer, Caterpillar. Looking at the sluggish demand for heavy engines and machineries, the company slashed its forecast of 2015 earnings and stated that 2014 will also be a year of stalled growth, just like the current year.
Caterpillar, however, did not go very far to forecast a recession. Yet, the announcement was clearly alarming, coming at a time when we see a series of discouraging comments from some other big firms like Norfolk Southern and FedEx. Global expanse allows these companies to offer a picture of how different countries are faring globally. Their remarks continue to underscore the corporate America’s anxiety, underlining worries about slowing world economy that are further pulverized by American and European political uncertainty and sluggish Chinese growth.
Doug Oberhelman, CEO of Caterpillar stated in a meeting of investors and analysts that they have witnessed slowed growth in economy. He also stated that till 2015 they would only see modest and anaemic growth.
Prices of the shares of the company plunged 1.5% to a reduced $80.50. One of the leading economists, Miller Tabak says that is way early to anticipate any kind of recovery but things are slowly but surely falling into right place. He elaborates that it is absolutely right on the part of the various investors to ask about the duration of all things falling into place. Miller says that the investors are rightfully questioning about what else is needed to come back to its original place so that the returning confidence can give them some kind of support to swing back once again into the equities.
The defensive step taken by Caterpillar is quite surprising as normally we do not see companies predicting so much in advance but the number one mining and construction equipment manufacturer has already done that. This must fight with queries about the deal of $7.6 billion, the biggest one in the history of industries, and decreased capital expenditures of different mining firms. Two of the biggest rivals are Cummins and Deere.
Oberhelman explains that the biggest issue ahead is how China tackles the declining growth. The GDP of the country is even now expected to grow by over 7% in this year. Yet it is far away from the kind of growth that was seen in last few years. He said this issue should be topping the list. He says that he firmly believes that US is gradually recovering and results will be seen early next year when there is no more political uncertainty in the country.