Caterpillar Inc. raised its sales and profit forecast for the year amid growing demand for construction and mining equipment and the company's new emphasis on boosting profit margins.
The world's largest producer of bulldozers, excavators, and other earth-moving machinery experienced widespread improvement in sales during the third quarter.
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Caterpillar's fortunes have improved over the last year following a yearslong slump from a downturn in the global commodities markets and slowdown in construction. The company's stock has risen more than 50% over the last 12 months, and was trading up 5.4% at $139.74.
Slow-growing economies around the world, the absence of a major infrastructure spending plan in the U.S. and a still-fragile mining sector, however, still threaten to undermine the prolonged upturn in machinery demand that company executives and investors have been expecting.
The Deerfield, Ill.-based manufacturer said on Tuesday that its dealers stepped up their purchases of equipment to restock inventories in response to rising customer demand, especially from an improving oil-and-gas industry in North America and rising demand for large excavators in China. Construction equipment sales in North America grew 31% from last year and mining equipment sales increased by 28%.
Chief Executive Jim Umpleby, who took over as CEO on Jan. 1, has said a prime focus under his watch would be profitable growth, rather than only increasing revenue and market share, with an eye toward parts and services. The third-quarter operating margin on machinery and engines was 14%, up from 7.8% a year ago, reflecting the company's emphasis on profit expansion. Caterpillar said it intends to maintain the lower cost structure from years of reducing employee rolls and closing plants during the slump to improve profit as its markets recover.
"We believe our margins going forward will be higher than they've historically been," said Chief Financial Officer Brad Halverson in an interview Tuesday.
Mr. Halverson said several rounds of layoffs, while difficult, have put the company on a better long-term footing.
"They were very hard -- hard for us to figure out how to do it but, more importantly probably, hard on our employees," he said. "But now we're seeing the benefit of that in terms of the efficiency of our operations."
Caterpillar has been hiring in the U.S. as it ramps up production. The company counted 49,700 U.S. employees at the end of September, up from 48,500 at the end of June. Its full-time workforce world-wide decreased to 96,700 employees at the end of the third quarter, down from 97,100 the prior year.
Caterpillar, which had in previous years released sales guidance for the following year during its third quarter, delayed the forecast until January, citing its new enterprise strategy.
Overall, profit for the quarter ended Sept. 30 was $1.05 billion, or $1.77 a share, up from $283 million or 48 cents a share last year. Wall Street analysts had expected per-share earnings of $1.11.
Caterpillar said revenue, including from its financing business, rose 25% to $11.4 billion. The company now expects full-year revenue to come in at about $44 billion, up from its forecast in July of $43 billion. It now expects per-share profit of $4.60, up from $3.50 earlier.
--Austen Hufford contributed to this article.
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(END) Dow Jones Newswires
October 24, 2017 15:27 ET (19:27 GMT)