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Caterpillar Inc. cut its sales forecast for a fourth time and warned next year won't be much different as miners and builders defer orders amid sluggish growth and low commodity prices.
Revenue this year will be about $39 billion, the Peoria, Illinois-based company said in a statement Tuesday, compared with previous guidance of $40 billion to $40.5 billion and the $40.1 billion average of 15 analysts' estimates tracked by Bloomberg.
Caterpillar hasn't posted an annual sales gain since 2012.
The biggest maker of construction and mining equipment is painting a bleaker picture for a fourth straight quarter, underscoring the challenges facing Jim Umpleby as he prepares to take over from Doug Oberhelman as chief executive officer.
While Caterpillar is the best-performing industrial stock this year on bets its cost-cutting efforts will reap rewards as demand recovers, commodity producers battered by a five-year downturn are still putting off orders.
"We remain cautious as we look ahead to 2017, but are hopeful as the year unfolds we will begin to see more positive momentum," Oberhelman said, without offering sales or earnings forecasts for next year.
Shares were down 1.4 percent at 2:12 p.m., extending declines after Vice President of Finance Services Mike DeWalt told analysts on a conference call that its 2017 assumptions rely on a pickup in U.S. construction and orders from mining companies.
Caterpillar expects prices of most mined commodities "to be flat to up modestly" next year and is seeing some improvement in dealer rebuild activity, while its market position continues to improve in China.
Construction sales in Brazil and Russia probably have bottomed at "very low levels" in 2016, it said.
Still, construction equipment sales in North America during the second half of 2016 are now anticipated to be lower than previously thought, with risks that may continue into 2017.
Uncertainty remains in Europe, particularly around the impact of Brexit on European economic growth, business confidence and investment, it said.
Restructuring costs in 2016, which were expected to be about $700 million, are now forecast to be about $800 million mainly because of asset writedowns booked in the third quarter.
"Things will remain soft and therefore they lowered volume outlook and profitability outlook," said Eli Lustgarten, a senior vice president at Longbow Securities. "It's consistent with the kind of environment unfortunately we see out there, and begins to underscore why the management succession is taking place now."
Caterpillar's global retail sales of machines slumped 18 percent in the three months through September from a year earlier, with only the Asia-Pacific region growing, the company said on Monday.
Third-quarter profit excluding restructuring costs was 85 cents a share, beating the 76-cent average of 18 estimates compiled by Bloomberg. Sales declined to $9.16 from $11 billion a year earlier.
The sluggishness in sales suggests Umpleby will have his work cut out for him. After taking the helm in July 2010, Oberhelman poured almost $20 billion into research and development, capital spending and deals over a couple of years, only to see emerging markets slow and commodity prices fall.
Since then, he's reorganized mining and energy segments, shutting down dozens of factories and eliminating thousands of jobs. A years-long initiative to streamline the company's supply and distribution network has yielded results as its gross margin has climbed annually since 2013, even as revenue slumped.
"At some point, and I think we're getting closer to that point, our business will turn up," Oberhelman said.
"It's a good time for Jim to take over, as I know Caterpillar will deliver even better financial results when key industries begin to improve and get back to mid-cycle replacement demand levels."
Caterpillar shares have climbed 25 percent this year, the best performance on the 30-member Dow Jones Industrial Average, which has gained 4.4 percent.