Caterpillar shares flat
day after U.S. authorities raid offices
Send a link to a friend
[March 03, 2017]
Inc's <CAT.N> shares were flat in premarket trading on Friday,
suggesting investors had put aside the company's tax risk as old news, a
day after federal law enforcement officials searched three of its
The company's shares closed down 4.3 percent at $94.36 on Thursday,
wiping out $2.47 billion of market value. The stock was down 0.5 percent
at $93.90 in trading before the bell on Friday.
Caterpillar said on Thursday it believed the search was part of an
Internal Revenue Service investigation related to profits earned by a
Swiss parts subsidiary, Caterpillar SARL, or CSARL.
Chief Executive Officer Jim Umpleby, in a statement to employees that
was seen by newspaper Peoria Star, said he was surprised by the turn of
events and that management did not have enough information to provide a
full understanding of the authorities' intent.
"This morning, a number of our colleagues in the Peoria area were
surprised when federal authorities arrived to execute a search warrant.
I'm sorry that we had to experience this today," he said in the
statement on Thursday.
The apparent escalation of the government's tax dispute with Caterpillar
comes amid Trump administration's promise to reform corporate taxes and
design a system that encourages companies to keep jobs and profits
within the United States.
[to top of second column]
Caterpillar earth movers are parked at a future development in
Arvada, Colorado March 2, 2017. REUTERS/Rick Wilking
Caterpillar is currently contesting an Internal Revenue Service demand that it
pay $2 billion in taxes and penalties for profits assigned to the subsidiary
between 2007 and 2012.
Morningstar analyst Keith Schoonmaker said that Caterpillar's current exposure
could rise to $3 billion, since the company has continued to file tax returns on
the same basis.
"We suspect the core of the matter is not "new" news, but rather that it relates
to the risk already disclosed in 2014-16 10-Ks," said Schoonmaker, who lowered
his fair value estimate on the stock to $64 from $67.
(Reporting by Narottam Medhora in Bengaluru; Editing by Sayantani Ghosh)
[© 2017 Thomson Reuters. All rights
Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.