Bulldozer builder projects sales rise to $44B
Caterpillar Inc. keeps raising the bar on sales and earnings expectations — and then keeps topping them.
The Deerfield, Ill., company projected 2017 sales of $44 billion, marking a thirdstraight increase in annual revenue projections. It also raised its earnings forecast. Caterpillar said in a statement Tuesday that third-quarter sales were $11.4 billion, higher than analysts estimated and above the level a year earlier. Shares surged.
In a sign that economic growth is taking root across all regions, Caterpillar reported increased demand in every place it does business. The manufacturer is benefiting from increased capital investments by mining customers, rising sales of construction equipment in China, and strength in onshore oil and gas industries in North America.
“We’ve got pretty good economic growth all over the world,” David Solomon, president of Goldman Sachs Group Inc., told Bloomberg Television on Tuesday. “The expectation for growth was not as strong as growth has actually come in.”
The gains underscore the International Monetary Fund’s assessment for brightening prospects in the world’s biggest economies.
“Results were better than expected across the board, with construction, mining, energy all strong,” Matt Arnold, an analyst at Edward Jones & Co., said Tuesday from St. Louis. The growth in energy and transport “has a nice impact on earnings given the fact that this business car-
ries higher margins.”
Estimates for Caterpillar earnings rose 22 percent the past three months, by far the most in the Dow Jones industrial average, as signs of demand improve in mining and sales of construction equipment rise in China. Caterpillar was the second-best performer in the equities index. Chief Executive Officer Jim Umpleby, who took over in January, has the company on track for its first annual sales gain since 2012.
Caterpillar reported Monday that retail machine sales in the three months that ended in September grew at the fastest pace since 2012, adding to evidence that the recovery is gathering steam. The company posted doubledigit percent sales declines every month in the two years through 2016.
In July, Caterpillar forecast 2017 sales and revenue of $42 billion to $44 billion. The company said at the time that it expected per-share profit of about $3.50 at the midpoint of the sales range.
Profit in the third quarter nearly quadrupled to $1.06 billion, or $1.77 per share. Earnings, adjusted for restructuring costs, came to $1.95 per share. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of $1.22 per share.
Revenue surged 25 percent to $11.41 billion, while six analysts surveyed by Zacks expected $10.61 billion.
The company’s shares climbed about 16 percent in the third quarter. They jumped $6.56, or 4.9 percent, to close Tuesday at $138.24.
The IMF, which is based in Washington, this month lifted its growth outlook for the U.S., the euro area, Japan and China from its previous forecast in July. The recovery spans roughly 75 percent of world output, according to the IMF.
“Caterpillar continues to see strength in a number of industries and regions, including construction in China, on-shore oil and gas in North America, and increased capital investments by mining customers,” it said in the statement.
A weakening dollar and increased momentum in global markets have led U.S. manufacturing to a strong earnings season so far with some of the industry’s largest players showing greater revenue and improved outlooks.
3M Co.’s third-quarter earnings on Tuesday beat the highest analyst estimate, and the company increased its projected profit for the year. United Technologies Corp. also raised its profit forecast on strength in demand for jet engines.
Orders for business equipment in the U.S. also have been increasing in recent months, which probably helped third-quarter growth. The Commerce Department will release September figures today for capital-goods orders, and Friday will bring gross domestic product for the July-September period.