Caterpillar Smashes Earnings Expectations And Boosts Its Outlook (CAT)
Global machinery giant Caterpillar earned $1.61 per share on an adjusted basis, which was much stronger than the $1.23 expected by analysts.
Management also raised earnings guidance. It now expects to earn $6.10 per share for the year, up from previous guidance of $5.85.
The stock is up 3.5% in pre-market trading.
"Given the business and economic uncertainties around the world and continuing decline in our mining sales, I am pleased with our performance in the first quarter," said CEO Doug Oberhelman. "We understand we don't control the economy and have instead focused on what we can improve. We're lowering costs, improving cash flow and driving value for our customers through the continued deployment of our lean manufacturing initiatives. We see the benefits of these actions in our first-quarter results and in improving market position for many of our products."
Caterpillar sells mining and construction equipment around the world, making it one of the better bellwethers of the global economy.
Here are some comments Oberhelman made about the global landscape in the context of the company's guidance:
"The change in our profit outlook is a result of our very solid performance in the first quarter, while also recognizing the uncertainty we are facing in a number of areas of our business and the continued risk that geo-political events could negatively impact global GDP growth," Oberhelman said. "China is one example of both the potential and uncertainty we face. During my visit a few weeks ago, it was evident the Chinese construction industry is facing challenges; however, I was pleased with how Caterpillar is performing compared to our competitors. I came away optimistic about how we are executing our China strategy as we implement our proven business model along with our dealers and suppliers who continue to invest in China. At the same time, Chinese leaders are in the midst of transitioning the world's second largest economy to a longer-term, more sustainable growth model while maintaining social stability. This is an enormous task that carries risks for the world economy. In addition, we are very concerned about the situation in Ukraine and Russia. We are hoping for a peaceful resolution, but business confidence around the world could dampen, and trade and world GDP could slow should the situation deteriorate. The global economy remains fragile, and as such, one or two setbacks could create substantial downside risk for the global economic recovery.
"In numerous recent discussions with construction customers and our dealers in the United States, I continue to hear positive stories about new projects and reasons for optimism. While that's encouraging, there's still quite a bit of room for improvement. The U.S. construction industry is still well below its 2006 peak, and we have a real need for infrastructure improvement," Oberhelman said.
"With the modest improvement in the global economy, we are expecting to deliver better sales and profit this year in Construction Industries, and Energy & Transportation appears to be on track for another solid year. However, 2014 is shaping up to be another very tough year for mining. In fact, today's outlook reflects a drop of about 80 percent in sales of large mining trucks from our peak year of 2012," Oberhelman added.
So, it sounds like cautious optimism, a tone we seem to get from a lot of CEOs all of the time.
- The 11 Most Powerful Militaries In The World
- Amazon Will Now Offer Old HBO Content For Prime Customers
- Obama Is Eating At The Legendary 'Jiro Dreams Of Sushi' Restaurant