Caterpillar On The Rise After Bulldozing Earnings Expectations

23 Apr 2015 | Author: | No comments yet »

Caterpillar On The Rise After Bulldozing Earnings Expectations.

Shares of machinery company Caterpillar are on the rise in early Thursday trading after the company posted a first quarter profit that was above Wall Street expectations by nearly 40%.CHICAGO — Caterpillar Inc., the largest construction and mining equipment maker, forecast profit for 2015 that topped analysts’ estimates as North American sales improved and as the company cuts costs.

The higher-than-expected per-share profit result is welcome news for Caterpillar shareholders, who just three months ago heard from the company that a tough operating environment amid slow economic growth will result in a sales and profit decline in 2015. Caterpillar reported Thursday morning that it recorded $12.7 billion in first quarter revenue, a 4% decline over sales reported this time last year but a figure that beat the $12.38 billion analyst consensus. While Caterpillar CEO Doug Oberhelman said in a statement Thursday that the quarter’s results were solid, he also noted that “the first quarter wasn’t without challenges. Construction is a rare bright spot for Caterpillar, which has seen revenue fall by about $10 billion in the last two years after a slump in commodity prices. Sales and revenues were off about 4% from the first quarter of last year, mining remained weak and construction was down in most regions.” He added, ”On the plus side, energy & transportation turned in another great quarter, although we don’t expect this to continue due to the oil-related portion of the business.” Specifically, the energy and construction division grew its profit 18% year-over-year, while construction sales volume was down $303 million year-over-year.

On Wednesday, Caterpillar said retail sales of construction machinery reported by dealers rose 2 percent in North America in the quarter and gained 4 percent in Europe, Middle East and Africa. Caterpillar said that the declines were broadly a result of lower volume and foreign currency exchange (which was primarily driven by weakness in the euro and Japanese yen). The company also pointed to a weak construction environment in China and “the absence of a large government order in Brazil” as reasons for volume declines in Asia and Latin America. Per-share profit in 2014 was $6.38 excluding restructuring charges. “We had a solid first quarter, which led to raising the profit outlook for 2015. The company said it expects the improvement to come from developed countries, while economies in developing countries will grow too, but at a lower rate than what they saw in 2014.

What’s more, political conflicts and social unrest in parts of the world will disrupt economic growth in parts of Africa and the Middle East, Caterpillar said, while stateside, questions over whether or not the Fed will raise interest rates could temper business confidence. Following the release of the earnings results, shares of Caterpillar surged nearly 5% in Thursday’s pre-market trading session; the stock lost some of those gains as the morning wore on, but shares are currently up 1.8%.

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