Northern, WI 04/23/2013 (indicesmedia) – The first quarter earnings of the largest mining equipment maker, Caterpillar Inc (NYSE:CAT) (Closed: $80.43) were highly disappointing. The company has dropped its forecast for 2013 and to a large extent reduced its projection for demand that it was expecting from the producers of commodities. In a statement, Caterpillar said that in comparison with the $7-$9 projection that has been posted in January, the new projection will now be $7 per share. Sales forecast will dip from the previous $60 billion-$68 billion forecast to $57 billion-$61 billion.

Global slowdown responsible
Doug Oberhelman the Chief Executive Officer said that Caterpillar shares climbed after it announced that it will recommence its stock buyback program and said that the worst phase in mining may be reaching an end. A prominent analyst said that the miss in earnings projections has been attributed to the slowdown in global growth which was higher than what had initially been expected. This was primarily due to a weakening in the mining outlook. According to a report by JP Morgan Chase and company, a drop in the expenditures of mining capital has resulted in dealers reducing their inventory. There is expected to be a global drop of 20 percent.

Touching the ground
The largest miner in the world, BHP Billiton Limited (NYSE:BHP) (Current: $63.30, down by 1.39%) as well as its rivals are all cutting costs as the demand as well as the prices for metals is on the decline and the stockpile is on the increase. This has been the result of a drop in demand from China which is the largest user. The company said that it will commence buying-back its stock in the second quarter and will spend an amount of $1 billion. Oberhelman said that the Caterpillar is very close to the bottom rung in mining.

There has been a decline of 10 percent in Caterpillar shares right through April. It has been the very worst performer amongst the Dow Jones Industrial Average that covers 30 companies. The reduced 2013 outlook is a reflection of the around 50 percent sales decline for traditional mining equipment that is manufactured by Caterpillar