By Brian Baker
Caterpillar Inc. reported strong quarterly earnings driven by improving end markets, particularly in North America, where demand for construction equipment and onshore oil and gas equipment boosted results that outpaced analyst estimates.
The Deerfield, Ill.-based manufacturing giant reported adjusted earnings per share of $2.16 for the quarter ended Dec. 31 compared with 83 cents in the prior year’s quarter, beating estimates of $1.79 per share.
Adjusted earnings exclude a $2.4 billion tax charge related to repatriation of foreign earnings under the recent U.S. legislation, and other items including restructuring costs.
On a GAAP basis, the company reported a loss of $1.3 billion or $2.18 per share, compared with a loss of $1.2 billion or $2.00 per share in the fourth quarter of 2016.
Revenues increased 35 percent in the quarter to $12.9 billion versus $9.6 billion in last year’s quarter. North American sales grew 46 percent in the quarter due to strong demand for equipment and aftermarket parts.
“The largest driver of the sales increase was volume, driven by an increase in end-user demand for new equipment across all of our regions,” said Chief Financial Officer Brad Halverson during a conference call with investors.
For the full year, the company earned $754 million or $1.26 per share, compared with a $67 million loss or 11 cents per share in 2016. Adjusted earnings per share were $6.88 compared with $3.42 in 2016.
Revenues increased 18 percent to $45.5 billion from $38.5 billion in 2016. It was the first increase in annual sales since they peaked at $65.9 billion in 2012.
“Coming off four years of decline, the production increases we saw throughout the year challenged our suppliers,” Halverson said. The company is working with suppliers to try to increase production and reduce lead times.
The company also provided guidance for 2018 when it expects adjusted earnings to be in a range of $8.25 to $9.25 per share, above the Wall Street estimate of $8.19.
“Economic indicators are positive at the moment, and we expect a strong start to 2018,” said CEO Jim Umpleby.
Caterpillar shares rose less than 1 percent to $169.37, an increase of $1.03. The stock has increased more than 70 percent in the past year.
Deutsche Bank analyst Nicole DeBlase expressed doubt as to whether the stock could continue its strong performance. “It isn’t typically a good sign when such a strong result is met with a tepid market reaction – we think there are few incremental buyers of CAT waiting on the sidelines at these levels,” she said in a note to clients.