Caterpillar on Track to Break Sales Slump -- 2nd Update
24 Oktober 2017 - 9:42PM
Dow Jones News
By Bob Tita and Andrew Tangel
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.
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.
Write to Bob Tita at robert.tita@wsj.com and Andrew Tangel at
Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
October 24, 2017 15:27 ET (19:27 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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