Caterpillar bulldozes estimates on strength in construction, mining

By Industrials FOXBusiness

The logo on a piece of Caterpillar heavy equipment is pictured at a storage yard in Denver July 22, 2008 (REUTERS/Rick Wilking)

Caterpillar (CAT) beat expectations for second-quarter earnings and raised its full-year outlook on Tuesday, as the maker of excavators, bulldozers and other heavy equipment benefited from stronger mining and construction activity.

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Over the past few years, Caterpillar faced weaker demand for its mining and energy equipment during a period of low commodity prices. The Peoria, Illinois-based company has seen its sales bounce back in recent quarters.

In the latest period, Caterpillar’s resource industries business, which includes mining equipment, led the way with a 21% increase in sales. Sales of construction equipment, the company’s largest business, were up 11%. Energy and transportation revenue improved 5%.

Overall, sales were up 9.6% at $11.33 billion. Caterpillar’s net income drove 46% higher to $802 million. Adjusted earnings, which exclude one-time costs, rose 40 cents to $1.49 per share. The results easily beat Wall Street’s average estimates for earnings of $1.26 per share on revenue of $10.93 billion.

After a stronger-than-expected quarter, Caterpillar now expects to report 2017 adjusted earnings of $5 per share, compared to its prior forecast of $3.75. Revenue is on pace to hit $42 billion to $44 billion. Caterpillar, the world’s largest maker of mining and construction equipment, previously expected between $38 billion and $41 billion in revenue.

Caterpillar shares jumped 4.8% to $113.37 in recent trading. The stock is up 21.3% since the start of the year and touched a new 52-week high of $114 on Tuesday morning.

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“While a number of our end markets remain challenged, construction in China and gas compression in North America were highlights in the quarter,” Caterpillar CEO Jim Umpleby said in a statement. “Mining and oil-related activities have come off of recent lows, and we are seeing improving demand for construction in most regions.”

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Caterpillar said sales in North America grew 7% amid higher spending among miners and energy producers. It also booked a 23% increase in Asia Pacific sales, citing construction equipment demand in China.

President Donald Trump has thrown his support behind the U.S. coal sector, which increased domestic production by 19% during the first five months of the year, according to data from the U.S. Energy Department. Trump also has signaled his intent to push a $1 trillion infrastructure spending plan. The expected investments have supported a rally in industrial stocks such as CNH (CNHI), Deere (DE) and Caterpillar.

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