Caterpillar Growth Momentum in Focus Amid Global Upswing -- Earnings Preview

By Andrew Tangel Features Dow Jones Newswires

Caterpillar Inc.'s stock surged in 2017 as many of the heavy machinery maker's markets around the world showed signs of turnaround. The Deerfield, Ill.-based manufacturer is due to report fourth-quarter earnings Thursday, 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 $1.50 in the fourth quarter, according to Thomson Reuters, compared with a loss of $2.00 the same quarter the prior year.

REVENUE FORECAST: Analysts expect $12 billion of revenue in the quarter, up from $9.6 billion a year earlier. In October, Caterpillar said it expected revenue of about $44 billion for all of 2017. Analysts expect full-year revenue of $44.5 billion, up from $38.5 billion in 2016.

TAX HIT, LIFT: Caterpillar held $16 billion in profits overseas in 2016, according to Audit Analytics. Recent changes to U.S. tax policy, signed into law by President Donald Trump in late December, could lead Caterpillar to book a one-time charge related to those profits. Analysts and investors will likely look for estimates of how the new tax law would change Caterpillar's effective tax rate, spur capital investments or make other changes. Also of interest may be whether Caterpillar will change a Swiss tax structure that is subject to a continuing criminal investigation. The company hasn't been accused of wrongdoing and has said it believes its tax position is correct.

GLOBAL UPSWING: Caterpillar's mining and construction markets around the world have showed signs of turnaround throughout 2017. The company said Wednesday a rolling three-month average of global retail sales of its machinery rose 34% in December, up from 26% in November. Some of the questions that may be on investors' and analysts' minds: How long might global growth accelerate? Is China's growth slowing or accelerating? What about North America, particularly with a U.S. construction market still waiting for President Donald Trump's plan to upgrade America's infrastructure?

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MANUFACTURING: Caterpillar has been hiring in the U.S. this year, a shift following years of deep cuts in its domestic workforce. The company may provide clues to whether it is continuing to ramp up production domestically and internationally. It may also signal any shifts in production because of tax or trade policy.

VICTORY LAP: Caterpillar stock rose nearly 70% during the first year of Chief Executive Jim Umpleby's tenure at the top of the company. Mr. Umpleby, who took over his current role at the start of 2017, is focusing the company on profitable growth, rather than just increasing revenue and market share. Investors will likely be looking for signs of progress or setbacks in Mr. Umpleby's efforts.

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

(END) Dow Jones Newswires

January 24, 2018 16:28 ET (21:28 GMT)