TORONTO (miningweekly.com) – US industrial equipment manufacturer Caterpillar has surprised investors with a significantly higher profit for the three months ended September, as higher sales volume and its focus on cost discipline resulted in improved profit margins across the three main business segments.
The Deerfield, Illinois-based equipment manufacturer reported headline earnings of $1.95 a share, beating average Wall Street analyst forecasts calling for earnings per share of $1.27 a share and reflecting a 130% improvement over the comparable period of 2016.
Sales and revenues rose 24% year-on-year to $11.4-billion.
Caterpillar’s financial position continued to strengthen in the quarter, with its Machinery, Energy & Transportation (ME&T) division contributing operating cash flow of about $600-million during the third quarter, and ME&T’s debt-to-capital ratio improving to 36.1%, down from 38.6% at the end of the second quarter. The company ended the third quarter of 2017 with an enterprise cash balance of $9.6-billion.
As the world's largest construction equipment manufacturer, Caterpillar, which has undertaken a significant restructuring to deal with the sustained market downturn over the last five years, said it continues to see strength in several industries and regions, including construction in China, on-shore oil and gas in North America, and increased capital investments by mining customers.
It is working with its supply chain to increase production levels to satisfy customer demand for those markets.
“As a result of our team’s strong performance, we are raising our 2017 profit outlook. We are executing our new strategy for profitable growth based on operational excellence, expanded offerings and services,” stated CEO Jim Umpleby.
In July, Caterpillar provided an outlook range for full-year 2017 sales and revenues of $42-billion to $44-billion, with a midpoint of $43-billion. The company now expects full-year 2017 sales and revenues of about $44-billion, it advised.
For the full year of 2017, Caterpillar now expects profit per share of about $4.60, or an adjusted profit per share of about $6.25, up from $3.50 a share at the midpoint of the sales and revenues outlook, or adjusted profit per share of about $5.
The company now expects to incur about $1.3-billion of restructuring costs in 2017, a slight increase from the previous outlook of about $1.2-billion. The outlook does not include potential mark-to-market gains or losses related to pension and other post-employment benefit plans. While the final impact will not be known until year end, the impact would be negative to profit, based on information as of the end of the third quarter, the company said.
The company’s NYSE-listed stock gained 7% on Tuesday to change hands at $140.44 apiece.