Caterpillar (CAT) Offers FY17 Guidance Update at Credit Suisse Conference

December 1, 2016 11:14 AM EST

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(Updated - December 1, 2016 11:19 AM EST)

Caterpillar (NYSE: CAT) posted its presentation to the U.S. SEC on Thursday. In part, the company says its on track for $2 billion of cost reductions in 2016.

On Thomson First Call consensus estimates, excluding restructuring, Caterpillar sees FY17 PPS and revenue of $3.25 and $38 billion as too optimistic given headwinds. (NOTE: The Street consensus is at EPS of $3.25 and revenue of $38.13 billion and First Call was at PPS of $3.25.)

The company sees operating profit tailwinds as:

  • Cost reduction carryover from restructuring action of $300 - $400 million
  • Additional cost reduction net of labor inflation at $300 - $500 million

Significant headwinds include:

  • At $38 billion, sales are about $1 billion than FY16 guidance, which is a variable margin headwind of $350 - $450 million
  • Short-term incentive compensation for employees for FY17 expected to be $500 - $600 million more than FY16
  • Cat Financial unfavorable at about $100 million.

Caterpillar said that, net of headwinds and tailwinds, the company remains committed to decrementals of 25 - 35%, excluding restructuring costs.

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