Caterpillar Inc. increased profit forecasts in a sign that mining-to-energy industries are gaining momentum amid a stronger global economy, assuming there are no commercial wars.
The largest manufacturer of construction and mining equipment saw its shares grow after raising its 2018 earnings forecast by up to 24 percent. The results of the first quarter exceeded analysts' estimates of sales and revenues as the demand for yellow signature machines accelerated. Caterpillar saw a continued strength for construction in North America and infrastructure in China, said on Tuesday.
The company is reaping the benefits as years of cost cutting cut margins amid a growing recovery in mining and construction. Last week, the IMF predicted that the strongest rise in the world economy since 2011 will continue for the next two years. The outlook comes after worries of a trade war helped Caterpillar stocks to their worst quarterly performance since 2015.
"All the end markets were weaker a year and a half ago, and since then we have had markets returning to go up". Rob Wertheimer, an analyst at Melius Research LLC, said in an interview in New York before the earnings report. "In these markets there is currently strength, but we are not yet at a point where we fear there will be a peak."
The company based in Deerfield, Illinois, expects to obtain adjusted earnings per share for 2018 from $ 10.25 to $ 11.25, Caterpillar said in the statement. That compares with the range of $ 8.25 to $ 9.25 that the manufacturer projected in January, and the average of $ 9.27 per share of the analysts' estimates compiled by Bloomberg.
The forecast assumes continued global economic growth, said Caterpillar. The possible impacts of future geopolitical risks and greater trade restrictions have not been included in the outlook.
The International Monetary Fund left its forecasts for world growth this year and the next in the 3.9 percent it estimated in January. Beyond that horizon, it was more pessimistic, the projection of world growth will fade as central banks adjust monetary policy, the US fiscal stimulus gives way and China's gradual slowdown continues. The IMF warned that the expansion could be derailed if countries resort to commercial eye-by-eye sanctions.
Several analysts have recently raised their ratings in Caterpillar, with Citigroup Inc. this week saying that the increase in capital returns and better Chinese economic information will support the actions in the next six to 12 months.
Caterpillar shares rose 4 percent to 8: 27 a.m. in New York before the start of normal operations.
(Caterpillar scheduled a teleconference to analyze the results at 11:00 am New York time.) Listening presentations and support materials will be available before the webcast at caterpillar.com / investors / events-and-presentations. callers in the US can dial + 1-877-216-8554 and international callers + 1-973-528-0009. The entry code for listening only is 5621)
– With the assistance of Vivian Li, Brandon Kochkodin, and Andrew Mayeda