By Andrew Tangel
Caterpillar Inc. is gaining steam after years of sluggish demand
for its giant yellow trucks and heavy equipment.
The equipment giant reported its first quarterly sales increase
since 2015 for the three-month period ended March 31, and boosted
its outlook for this year on signs of recovery in some
long-struggling construction and mining markets.
The results mark an unexpected victory for Chief Executive Jim
Umpleby, who since taking over on Jan. 1 has pushed ahead with cuts
to Caterpillar's workforce and manufacturing footprint and dealt
with a raid by federal agents on the company's headquarters in
Peoria, Ill.
Caterpillar said it expects to take in up to $41 billion in
revenue this year, up from previous projections of up to $39
billion. Caterpillar reported $38.5 billion in revenue in 2016, its
fourth straight year of declining sales. On Monday, Caterpillar
reported a measure of retail sales of its machines world-wide had
increased for the first time since November 2012.
"There are just a lot of positive things happening in our
segments that have not happened for quite a while," Chief Financial
Officer Brad Halverson said in an interview. "We're feeling
positive about things -- much better than we felt a year ago for
sure."
Caterpillar shares rose more than 7.5% Tuesday afternoon to
$104.10.
Rising commodity prices and mining activity in much of the world
outside the Americas helped drive a 15% revenue increase for
Caterpillar's resource-industries segment in the first quarter,
thanks largely to aftermarket part sales. Revenue in Caterpillar's
construction segment also increased 1% the first quarter, boosted
by sales in Asia/Pacific and Latin America. The company has
recently cited strong demand in China.
Caterpillar was sent reeling in recent years as commodity prices
slumped and global mining activity slowed. The downturn consumed
the final years of Doug Oberhelman's tenure as chairman and CEO
before he retired at the end of March.
Caterpillar executives said Tuesday that many of their main
markets remain depressed.
"There continues to be uncertainty across the globe, potential
for volatility in commodity prices, and weakness in key markets,"
Mr. Umpleby said. He called his first quarter as chief executive
"eventful."
Amy Campbell, director of investor relations, said Caterpillar
could double the number large mining trucks it sells this year to
about 140; but that would still be far below the company's average
sales rate for those machines.
Despite positive signals abroad, Caterpillar reported a 7%
decline in construction sales in North America. Caterpillar cited a
glut of used equipment on the market and "weak infrastructure
development." Executives have said that even if President Donald
Trump succeeds in his plan to inject $1 trillion into public-works
projects, the boost in infrastructure spending might not translate
into new business for Caterpillar until next year.
Restructuring costs are expected to jump to $1.25 billion this
year, up from projections of $750 million previously, as
Caterpillar closes factories in Aurora, Ill., and Gosselies,
Belgium. Its workforce continues to shrink along with its global
manufacturing footprint. Caterpillar's full-time workforce declined
to 95,300 employees at the end of the first quarter, from 101,400 a
year earlier.
Mr. Halverson didn't rule out further closures and said the
company would pay close attention to costs. The multiple rounds of
cuts have "been really hard on us and our employees," he said.
In a call with analysts, Mr. Umpleby offered no new insights
into the federal government's escalating criminal investigation of
the company's tax strategy, one of its Swiss subsidiaries and
export filings.
On March 2, agents from the Department of Commerce, Internal
Revenue Service and the Federal Deposit Insurance Corp.'s inspector
general raided Caterpillar's headquarters and two nearby
facilities. Executives have said the company was surprised by the
search warrant, noting Caterpillar's cooperation with the
investigation.
"If we find something that violates our values and our code of
conduct we will take appropriate action," Mr. Umpleby said.
Mr. Halverson, in the interview, declined to elaborate.
Overall, Caterpillar reported a profit of $192 million or 32
cents a share for the first quarter, compared with $271 million or
46 cents a share a year ago. Excluding restructuring costs, the
company said it earned $1.28 a share, compared with 64 cents a year
ago. Total sales and revenues rose to $9.82 billion from $9.46
billion a year ago.
In addition to higher sales, Caterpillar also expects earnings
per-share this year to be $2.10, at the midpoint of its sales
outlook, or $3.75 excluding restructuring costs. Previously the
company said it expected per-share earnings of $2.30, or $2.90
excluding restructuring costs.
--Joshua Jamerson contributed to this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
April 25, 2017 15:14 ET (19:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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