CAT Caterpillar Inc

By Andrew Tangel 

Caterpillar Inc.'s sales jumped 31% in the first quarter as the heavy machinery giant reported continued strength in construction and mining markets around the world.

The Deerfield, Ill.-based maker of bulldozers, mining trucks and other equipment boosted its profit outlook for the year, saying it could earn as much as $10.75 a share in 2018, $2 more than the upper end of its previous forecast.

Revenue of $12.9 billion in the quarter was lifted in part by a stronger euro and Chinese yuan. Some of the foreign-exchange gains were offset by higher manufacturing costs, primarily due to the price of steel. U.S. manufacturers say their steel costs have risen as the Trump administration moved in recent months to place duties on imports from many foreign countries.

"The strength in the global economy as well as favorable pricing for most commodities is benefiting many of our end-markets," said Chief Financial Officer Brad Halverson.

Caterpillar warned that trade tensions that reach far beyond the steel industry could darken the outlook for the rest of the year. Officials in both China and the U.S. are threatening each other with additional trade barriers.

Caterpillar executives said price increases would offset increased raw material costs already baked into their forecast.

"We included what we know about steel but the situation remains very fluid," Amy Campbell, Caterpillar's director of investor relations, said in an interview. "We remain optimistic that government leaders can work towards a positive outcome."

Caterpillar's shares fell more than 5% by midday as investors took stock of earnings that executives characterized as a "high watermark for the year." The company's annual revenue jumped 18% in 2017 following a string of consecutive yearly declines.

Sales growth in North America was Caterpillar's biggest driver in the quarter. Dealers boosted inventories as demand for construction equipment increased, primarily due to public works and energy infrastructure such as pipelines.

Increased building construction and spending on infrastructure in China drove sales in its Asia/Pacific region. Ms. Campbell told analysts that demand in China for 10-ton excavators would rise 30% this year, versus earlier predictions of 8%. "We do at this point continue to expect China to be very strong for the rest of the year," she said.

Mining companies increasingly replaced equipment and expanded their fleets as commodity prices remained strong.

Overall for the first quarter the company reported a profit of $1.67 billion, or $2.74 a share, up from $192 million, or 32 cents a share a year earlier. On an adjusted basis, earnings more than doubled to $2.82 a share.

Last year's results were dented by $723 million in restructuring costs primarily related to a facility closure. Restructuring costs in the most recent quarter were $69 million.

Analysts polled by Thomson Reuters had forecast earnings of $2.13 a share on $12.07 billion in sales.

The company's domestic workforce stood at 51,500 employees at the end of March, up from 46,500 a year ago.

Imani Moise contributed to this article

Write to Andrew Tangel at Andrew.Tangel@wsj.com

(END) Dow Jones Newswires

April 24, 2018 14:23 ET (18:23 GMT)

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