Caterpillar’s first quarter earnings indicate that the global economy is doing well and that the global mining sector continues to be healthy. Caterpillar, the world’s top maker of heavy machinery, boosted its 2018 profits forecast after beating estimates for first-quarter earnings on strong global demand for its equipment.
The company is considered a bellwether of global economic activity because of its size and the products it produces which are large, expensive and used in a number of projects that companies and governments commit to only when they confident in the economic outlook.
For the three months ended on March 31 Caterpillar reported a net profit of $2.74 per share, above most analysts' consensus forecast of $2.04 per share.
It cited better-than-expected sales volume as the main driver of its improved full-year guidance.
The firm, which saw continued strength for construction in North America and infrastructure in China in the first quarter of the year, boosted its 2018 profit outlook by $2 a share over the previous quarter, to a range of $10.25 to $11.25 per share.
Caterpillar cited better-than-expected sales volume as the main driver of its improved full-year guidance, which assumes continued global economic growth. But the company warned that any potential impacts from geopolitical risks and trade restrictions had not been included in the outlook.
“Based on our strong first-quarter results and higher demand across all regions and most end markets, we are raising our outlook for 2018. We will continue to make targeted investments in expanded offerings and services, consistent with our strategy for long-term profitable growth,” said Caterpillar chief executive officer Jim Umpleby.
The heavy-duty equipment manufacturer added 10,900 jobs from a year earlier, bringing its worldwide total to 118,800 and it repurchased $500 million of common stock in the first quarter of 2018.
In its summary of sales assumptions for 2018 as compared to 2017 the company said the following about the resources industries. “The company believes global economic conditions and favorable commodity price levels will drive miners to increase capital expenditures in 2018 for both equipment replacement cycles and expansions. In addition, higher machine utilization levels should support aftermarket parts growth. Strong global demand for commodities is also expected to be a positive for heavy construction and quarry and aggregate customers.”