This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 25, 2017).
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.
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The world's largest producer of bulldozers, excavators, and other earth-moving machinery experienced widespread improvement in sales during the third quarter.
Caterpillar's fortunes have improved over the past year after a yearslong slump caused by a downturn in the global commodities markets and a slowdown in construction. The company's stock price has risen more than 50% over the past 12 months, gaining 5% Tuesday to close at a record $138.24.
Slow-growing economies around the world, a still-fragile mining sector and the absence of a significant infrastructure-spending plan in the U.S., however, still threaten to undermine the prolonged upturn in machinery demand that company executives and investors have been expecting.
The manufacturer based in Deerfield, Ill., said 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 natural-gas industry in North America and for large excavators in China. Construction-equipment sales in North America rose 31% from a year earlier and mining-equipment sales increased 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 earlier, 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 declined to 96,700 employees at the end of the third quarter, down from 97,100 a year earlier.
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 totaled $1.05 billion, or $1.77 a share, up from $283 million, or 48 cents a share, a year earlier. 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 roughly $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 25, 2017 02:47 ET (06:47 GMT)