Caterpillar (NYSE: CAT) reported Q4 EPS of $0.74, $0.05 better than the analyst estimate of $0.69. Revenue for the quarter came in at $11 billion versus the consensus estimate of $11.45 billion.

GUIDANCE:

Caterpillar sees FY2016 EPS of $3.50, versus the consensus of $3.48. Caterpillar sees FY2016 revenue of $40-44 million, versus the consensus of $43.3 million.

2016 Outlook

The outlook for 2016 sales and revenues does not anticipate improvement in world economic growth or commodity prices. Sales and revenues are expected to be in a range of $40 to $44 billion – a mid-point of $42 billion. The mid-point of the range reflects a decline of about $3.5 billion from last October's preliminary outlook for 2016 sales and revenues and a year-over-year decline of about 10 percent. The decrease from last October's preliminary outlook is largely a result of continued declines in commodity prices and economic weakness in developing countries.

The profit outlook for 2016 is $3.50 per share at the mid-point of the sales and revenues range. To provide a better understanding of our expectations for 2016 profit, we are providing our outlook with and without anticipated restructuring costs. Over the past few years, we have undertaken restructuring activities designed to lower our long-term cost structure. Additional restructuring actions are anticipated in our 2016 outlook. We expect the cost of these restructuring actions in 2016 to be about $400 million or about $0.50 per share. Excluding restructuring costs, our profit outlook for 2016 is about $4.00 per share at the mid-point of the sales and revenues range.

Sales in Energy & Transportation are expected to decline about 10 to 15 percent from 2015. Much of the decline is a result of low oil prices. During the first half of 2015, sales remained at relatively high levels for equipment used in drilling and well servicing because we started the year with a substantial order backlog. Sales declined during the second half of 2015 as orders from the backlog were shipped and new order levels were weak. That impact, along with the further decline in oil prices, are the primary reasons for the expected decline in Energy & Transportation's 2016 sales. In addition, continuing weakness in economic conditions in much of the world is expected to be negative for sales of power generation equipment, industrial engines, marine and rail.

Sales in Resource Industries are expected to be down about 15 to 20 percent from 2015 as a result of continuing reductions in mining-related commodity prices and difficult financial conditions for many mining customers around the world.

Sales in Construction Industries are expected to decline about 5 to 10 percent from 2015. In the United States, improving labor market conditions and relatively stable economic growth should continue to support the wider economy and construction. However, we expect weakness in developing countries and lower activity in oil-producing regions to persist.

Positively impacting the profit outlook is substantially lower pension and other postemployment benefit (OPEB) costs. The most significant reason for lower pension and OPEB costs is from a change in accounting principle so expense reflects the effects of economic and interest changes in the year in which the gains and losses are incurred. The impact of this change is expected to have a positive impact on 2016 profit of about $425 million. A more complete review of the change is included in Q&A 10 on page 19. In addition, we are expecting substantial additional cost reduction in 2016, much of it from the restructuring actions taken in 2015. The positive impacts on profit from lower costs and lower pension and OPEB expense are expected to be more than offset by the impact of lower sales and revenues.

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