Caterpillar beats profit estimates on strength of mining equipment

April 24, 2019

Caterpillar Inc. beat forecasts for first-quarter profit on higher sales of its construction and mining equipment in its biggest market North America.

Reuters reported that the heavy-duty equipment maker, a bellwether for economic activity whose results often influence global stock market sentiment, also raised its full-year profit forecast as it booked a tax gain in the first quarter stemming from President Donald Trump’s tax reforms.

The company reported that “mining production levels and commodity market fundamentals remained positive,” leading to an 18 percent increase in sales for its resource industries. Meanwhile, higher demand for new equipment, primarily to support road construction, in North America drove revenue in its construction unit up 3 per cent. Revenues in energy and transportation were flat.

The company’s shares were up 1 percent in premarket trading. The latest quarter results come off a disappointing showing in the fourth quarter, which was hit by a sharp slowdown in China.

Sales in North America rose 7 percent, driven by a 13 percent rise in sales of construction equipment.

The company reported an adjusted profit of $2.94 per share in the first quarter, compared with $2.82 a share, last year. Analysts on average had expected earnings of $2.85 a share.

Total sales and revenue rose about 5 percent to $13.5 billion.

The company said it now expects 2019 profit of $12.06 per share to $13.06 per share, compared with $11.75 to $12.75 per share forecast earlier.

Andrew Bonfield, Caterpillar’s chief financial officer, said the company’s profit margins had come under pressure from tariffs and higher steel costs, but over the course of the year it expected price increases to keep margins steady.

“Overall we expect price realizations to offset manufacturing cost increases,” he said.

He said profits in the first quarter had been hit by the strength of the US dollar, particularly against the euro, and there had been some weak spots including sales to the oil and gas industry in North America.

Overall, however, the group was “very confident” in its end markets, with resource industries a particularly strong point.
 

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