Caterpillar Gains on Mining, Construction Strength -- 2nd Update
24 April 2019 - 5:12PM
Dow Jones News
By Austen Hufford and Micah Maidenberg
Caterpillar Inc. beat revenue expectations for the first
quarter, thanks to higher demand for its mining and construction
equipment.
The machinery giant's improved sales suggest that at least some
corners of the global economy may be stabilizing after signs of
slower growth earlier this year. Investors had been concerned in
recent quarters about demand, particularly in China, as well as
higher costs.
Despite the revenue gains, Caterpillar's shares fell more than
2% in recent trading Wednesday as the company's costs continued to
rise.
The company paid more for labor and freight in the quarter, as
well as some raw material in part due to U.S tariffs on imported
steel and aluminum. Caterpillar had $70 million in costs related to
tariffs in the quarter, compared with $110 million for all of last
year following the implementation of those tariffs last March.
Caterpillar has raised prices to offset those costs. It said
prices were up just over 2 percentage points overall in the quarter
from a year ago. Higher prices and volumes added $557 million to
operating profit in the quarter, offsetting $375 million in higher
manufacturing costs.
Deerfield, Ill.-based Caterpillar on Wednesday reported sales,
including revenue from financial products, of $13.47 billion for
the quarter, up 5% from last year and more than the $13.27 billion
analysts predicted, according to FactSet.
Revenue from its mining business rose 18% in the first quarter,
while construction sales were up 3%. Energy and
transportation-equipment sales were flat.
In the U.S. and Canada, Caterpillar's largest market, sales rose
7%.
"That reflects the strong construction activity, as state and
local infrastructure builds are still going up," said Andrew
Bonfield, Caterpillar's financial chief, in an interview. "North
America seems to be going very well."
Caterpillar said it now expects demand for its products in China
to rise slightly for the year, compared with expectations for no
growth previously. Other companies have said that government
stimulus in China appears to be stabilizing the world's
second-largest economy. Caterpillar has said it makes some 10% of
its sales in China.
The company reported a profit of $1.88 billion, or $3.25 a
share, up from $1.67 billion, or $2.74 a share, in the year-ago
period. After adjustments, the company said it earned $2.94 a
share, versus the $2.83 a share analysts predicted.
Caterpillar boosted its profit forecast for the year due to new
guidance from the U.S. Treasury Department, as the details from the
2017 tax overhaul continue to filter through to corporate finance
departments. It now predicts $12.06 to $13.06 a share in earnings
this year, up from the previous expectations of $11.75 to $12.75 a
share. The company expects the additional profit to be excluded
from adjusted earnings in an upcoming quarter.
Write to Austen Hufford at austen.hufford@wsj.com and Micah
Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
April 24, 2019 10:57 ET (14:57 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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