Caterpillar Inc. on Tuesday signaled cautious optimism about the global economy as it offered fresh evidence that it was recovering in many of its markets from a yearslong sales slump.
The world's largest heavy-machinery maker, often seen as a bellwether for economic conditions, highlighted growing demand for Chinese construction and signs of a global mining industry coming back to life as the manufacturing giant boosted its outlook for the year, despite sluggish infrastructure spending in the U.S. and weakness in Brazil and the Middle East.
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The Peoria, Ill.-based maker of bulldozers, mining trucks and other heavy machinery said Tuesday it expects revenue of $42 billion to $44 billion for all of 2017, up from a previous forecast of as much as $41 billion.
The company's second-quarter results released Tuesday comes after four consecutive years of declining sales amid a slowdown in the construction markets and a downturn in commodities.
But evidence of a sustained, long-term reversal remained unclear as weaknesses persisted in some countries and markets. And executives noted revenue increases in some cases followed steep declines, and that sales were still off highs of recent years.
Caterpillar said it's expecting strengthening demand for excavators in China in response to government spending on public works projects, a pickup in the North American natural gas industry and increasing sales of replacement parts for mining equipment as fewer trucks remain idle.
Geopolitical uncertainty and commodity-price volatility still pose risks to Caterpillar's rosier outlook for the year, but executives declined to speculate how the company's fortunes might fare next year and beyond. Executives cautioned construction-equipment sales could slow in the latter part of the year.
Caterpillar said it second-quarter revenue jumped 10% to $11.3 billion from the prior year. Shares rose about 6% Tuesday afternoon to $114.15.
Caterpillar is the beneficiary of an upswing so far this year in the global economy. Stabilized commodity prices have allowed major developing economies like China, Brazil, Russia and Nigeria to strengthen, after a commodity price plunge in 2014 that had set them reeling.
An International Monetary Fund index of global commodity prices has risen nearly 27% since hitting a 12-year low in 2016. The World Bank projected last month that by next year global economic growth would reach a seven-year high.
Developed countries have benefited as well from this improvement in international prospects. A report this month on industrial production, found that factory output in the Eurozone was at the highest level in six years.
Racing to ramp up production in heavy machines such as excavators, Caterpillar also beefed up its workforce in the second quarter, a shift following years of layoffs and factory closures.
Its U.S. payroll grew to 48,500 employees by the end of June, an increase of 2,000 over the previous three months, and Caterpillar is hiring at factories in Illinois, Indiana and Arkansas. Caterpillar's international workforce rose to 62,700, up 1,300 employees.
Sales for construction equipment in North America, its largest market, rose 3% in the quarter. But in a contrast to the Chinese market, executives lamented stagnant U.S. government spending on roads, bridges and other infrastructure that would further buoy its fortunes.
"The United States is in need of infrastructure investment," Caterpillar Chief Financial Officer Brad Halverson said.
While Caterpillar's revenue from construction equipment rose 11% overall were down in the quarter, sales decreased 5% in Europe, the Middle East and Africa. And while Latin American sales rose 31% as several countries' economies showed signs of improvement, executives cited continued weakness in Brazil.
Evidence of growth in the mining industry has yet to move the needle on new equipment sales. Second-quarter revenue growth of 21% in this segment was driven primarily by sales of replacement parts, which executives said was a likely prelude to eventual orders for new equipment.
"The cycle is starting to play out," Mr. Halverson said. He noted mining truck utilization has ticked up, and the parked fleet has declined.
Signs of turnaround in some of Caterpillar's markets emerged in the first quarter. That trend continued in the months since as retail sales of Caterpillar machinery increased 7% world-wide during the three months to the end of June.
Overall for the second quarter, Caterpillar reported a profit of $802 million, or $1.35 a share, compared with $550 million, or 93 cents a share a year ago.
Analysts polled by Thomson Reuters had expected $1.26 in adjusted earnings per share on revenue of $10.93 billion.
--Josh Zumbrun and Austen Hufford contributed to this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
July 25, 2017 16:02 ET (20:02 GMT)