Caterpillar sees more pain ahead this year

Manufacturing slump, spending cuts and virus weaken outlook.

Caterpillar Inc., a worldwide barometer for manufacturing, is warning of more pain to come for the global economy in 2020.

The heavy-equipment maker is projecting its profits for the year will trail analysts’ estimates by as much as $2 a share. The weak outlook comes just as markets are reeling from the worsening outbreak of the coronavirus, a slump in manufacturing activity and major cutbacks in spending.

“We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inventories,” CEO Jim Umpleby said in a statement.

Caterpillar has been trying to cut costs and trim inventories as demand in some of its main markets trails production. The outlook signals further headwinds for machine sales, which fell the most in almost three years last month.

“We expect to be sort of flat to down 5% for our business in China, because of general market conditions, competitor positioning and so forth,” Chief Financial Officer Andrew Bonfield said Friday. “It’s a very competitive market, we were down slightly this year, even in an upmarket because of competition.”

Bonfield said Caterpillar expects U.S. residential and nonresidential construction to decline, while investment in state and local infrastructure will be stable. He also said capital spending in mining will continue to increase in 2020, but the recovery has been “much more slow and steady.”

The company reported adjusted fourth-quarter earnings of $2.63 per share, beating the $2.37 average of estimates compiled by Bloomberg.