Caterpillar (NYSE: CAT) reported Q1 EPS of $0.67, $0.01 worse than the analyst estimate of $0.68. Revenue for the quarter came in at $9.46 billion versus the consensus estimate of $9.39 billion.

At the end of the first quarter of 2016, the order backlog was $13.1 billion, about the same in total and by segment as the end of 2015. Compared to the first quarter of 2015, the order backlog declined about $3.5 billion with decreases in all segments.

2016 Outlook

We have seen recent increases in commodity prices, some signs of improvement in construction equipment in China and better order activity than we expected at bauma, the world's leading trade fair for many of the industries we serve. While we are seeing a few positive signals, other parts of our business remain challenged. As a result, we have lowered the midpoint of the outlook for 2016 sales and revenues about 2 percent.

Sales and revenues in 2016 are expected to be in a range of $40 to $42 billion with a midpoint of $41 billion. The previous outlook was a range of $40 to $44 billion with a midpoint of $42 billion. The decline in the midpoint of the sales and revenues outlook range is a result of several factors that, while not individually large in the context of the outlook, collectively add up to about $1 billion. Those factors include lower transportation sales (rail, marine and the ending of production of on-highway vocational trucks), lower mining sales and weaker price realization than previously expected.

The profit outlook at the midpoint of the sales and revenues range is now $3.00 per share, or $3.70 per share excluding restructuring costs. The previous profit outlook was $3.50 per share, or $4.00 per share excluding restructuring costs at the midpoint of the previous sales and revenues outlook. The expected decline in sales and revenues and an increase in expected restructuring costs are the primary reasons for the decline in the profit outlook.

Restructuring costs are now expected to be about $550 million in 2016, up $150 million from the previous outlook. The decision to end production of on-highway vocational trucks is the primary reason for the increase in restructuring costs.

"While many of the industries we serve are challenged today, we're looking ahead and investing for the future. We're investing substantially in R&D, driving forward on our Lean journey, continuing implementation of Across the Table with our dealers and accelerating our digital strategy," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman.

"Our digital strategy is an exciting investment for the long term. We're hard at work, inside Caterpillar and with our digital partners, developing the data architecture and applications that will make our products smarter and help our customers improve productivity and safety. Our goal is to help customers be more productive, better manage their fleets and make more money with Caterpillar than they could with our competitors. Our approximately 400,000 (and growing) connected assets mean entire fleets and job sites – from machines to tablets to drones – will eventually share data on one common technology platform in the age of smart iron. One thing that I am certain of is that it's times like these when the Caterpillar team demonstrates the innovation and ambition to be the leader in all we do," added Oberhelman.

GUIDANCE:

Caterpillar sees FY16 EPS of about $3.70, versus prior guidance of $4.00 and the consensus of $3.59. Caterpillar also said it sees FY16 revenue of about $40 - $42 billion, versus prior guidance of $40 - $44 billion and the consensus of $40.6 billion.

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