Caterpillar and Sandvik report strong first quarter earnings
For the first time in more than two years Caterpillar registered an increase in sales in several of the industries it serves and as a result the world’s largest heavy equipment manufacturer reported first-quarter earnings and revenue that exceeded Wall Street’s expectations.
Caterpillar reported earnings of $1.28 versus and expected earnings of 62 cents and its revenue came in at $9.822 billion versus $9.271 billion by Thompson Reuters.
Caterpillar credited the strong quarter to the resource industries. The company, which is seen as a bellwether for the health of commodities, energy and construction markets, raised its forecasts for full-year sales to $38-$41 billion, up from $36-$39 billion that was forecast in January.
“Our team delivered outstanding operational performance and, for the first time in more than two years, same quarter sales and revenues increased,” CEO Jim Umpleby said in a statement. “We’re also benefiting from our significant cost reduction and restructuring actions, which have improved cash flow and further strengthened an already healthy balance sheet.”
Caterpillar is the largest maker of mining equipment in the world and has benefitted from the rebound of commodity prices in recent months.
Sandvik is also seeing an uptick in the mining industry. The Swedish company reported a strong first-quarter operating profit that beat market forecasts.
Operating profit at the Stockholm-based group rose to 3.51 billion Swedish crowns ($397.9 million) from 2.41 billion a year ago, beating a 3.17 billion mean forecast in a Reuters poll of analysts, the Daily Mail reported.
Sandvik’s outperformance was mainly due to 30 percent growth in Sandvik's mining business, where the need for mining firms to replace equipment after several years of squeezed capital spending has begun to boost demand.
Manufacturing gauges in markets like China, Europe and the United States have hit multi-year highs in recent months, adding to expectations of increased demand for Sandvik's products also outside the mining industry.
The group's Machining Solutions division (SMS), the world's largest maker of metal-cutting tools, also beat both earnings and order forecasts for the quarter, and its North American business returned to growth after many quarters of declines.
Caterpillar also raised its guidance for full-year earnings to $3.75 per share from $2.90 per share. The Street expected $3.26 per share. The company also revised its full-year revenue outlook to $38 billion to $41 billion versus the Street's expectation of $38.27 billion.
Wall Street is also closely watching President Donald Trump's policies to determine their impact on the Caterpillar. While a trillion-dollar infrastructure plan would likely boost companies involved in construction, Caterpillar's international business is vulnerable to any trade-restricting policies.
Shares of Caterpillar have rallied more than 17 percent since November, when Trump won the election. Almost 100 days into his presidency, Trump and the Republican-controlled Congress have yet to introduce a major infrastructure initiative. Caterpillar has said that even if such legislation were introduced, the company does not expect to see a material benefit until at least next year.