Caterpillar Earnings: What to Watch

By Andrew Tangel Features Dow Jones Newswires

Caterpillar Inc.'s stock has surged more than 50% over the past 12 months, and on Monday the company said retail sales of its heavy machines accelerated overall world-wide in September. The Deerfield, Ill.-based manufacturer is due to report third-quarter earnings Tuesday, providing clues to the health of the global economy.

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Here's what to watch for:

EARNINGS FORECAST: Wall Street analysts expect earnings per share of $1.11 in the third quarter, according to Thomson Reuters, compared with 48 cents the same quarter last year. In July, Caterpillar said it expected earnings per share for the full year to be $3.50 at the midpoint of its revenue outlook.

REVENUE FORECAST: Analysts expect $10.6 billion of revenue in the quarter, up from $9.2 billion a year earlier. In July, Caterpillar said it expected revenue of $42 billion to $44 billion for all of 2017, up from a previous forecast of as much as $41 billion.

GLOBAL OPTIMISM: In July, Caterpillar signaled cautious optimism about the global economy, saying that many of its construction and mining markets were showing signs of improvement. Will the trend continue? Caterpillar said Monday a three-month rolling average of retail sales increased 13% in September compared with the same month the previous year, up from 11% growth in August. The company has previously cited growth in China's construction sector and signs of life in the long-struggling mining industry. In July, the company boosted its earnings outlook for the year, even in the face of sluggish spending on public works projects in the U.S. and weakness in Brazil and the Middle East.

CEO STRATEGY: Chief Executive Jim Umpleby, who took over his current role on Jan. 1, outlined his management strategy in September. A prime focus is profitable growth, rather than just increasing revenue and market share, with a focus on parts and services. Investors will likely be looking for any signs of progress in boosting Caterpillar's profit margins.

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MANUFACTURING: In July, Caterpillar said its U.S. payroll grew to 48,500 employees by the end of June, an increase of 2,000 over the previous three months. The company said it was hiring at factories in Illinois, Indiana and Arkansas. The hiring marked a shift, given the waves of layoffs the company has endured in recent years amid a prolonged slump in global commodities and construction. Investors will likely look for signs of a continued production ramp-up, as well as any commentary on U.S. trade, tax and infrastructure policy.

Write to Andrew Tangel at Andrew.Tangel@wsj.com

(END) Dow Jones Newswires

October 23, 2017 11:46 ET (15:46 GMT)