Caterpillar Raises Forecast, Sees 2015 Growth Prospects
Caterpillar Inc., the largest construction equipment maker, raised its full-year earnings forecast and said sales may gain in 2015 on an improvement in global economic growth.
The company posted better-than-expected third-quarter profit and revenue and said earnings per share excluding one-time items for this year are expected to be $6.50, 30 cents more than previously projected.
“In developed countries, growth-oriented monetary policies should support continued modest economic improvement,” the Peoria, Illinois-based company said in a statement. “There is potential for increased investment in infrastructure in countries such as the United States, India and Turkey.”
Caterpillar had higher sales of construction machinery in North America, and of equipment for the oil and gas industry, in the third quarter. That outweighed another decline in mining equipment, in which the company is the largest player. Coal and metals producers have continued to cut spending in the face of lower commodity prices.
“The stock is reacting to a solid quarterly report and constructive outlook into 2015 against a challenging economic and geopolitical backdrop,” Larry De Maria, a New York-based analyst for William Blair & Co. who recommends buying the shares, said in an interview.
Caterpillar said 2015 sales will be “flat to slightly up.”
The improvement in office and commercial construction in North America, and the gradual pickup in residential activity, is boosting demand for Caterpillar’s excavators and bulldozers. U.S. construction spending rose 5 percent in August from a year earlier, data compiled by Bloomberg show.
The picture for mining is far less rosy. The combined capital spending of 10 Caterpillar customers including miners BHP Billiton Ltd. and Vale SA is estimated to shrink by 18 percent in the next two years, according to data compiled by Bloomberg Intelligence.
Caterpillar Chairman and Chief Executive Officer Doug Oberhelman expanded in mining since taking the helm in 2010 by spending more than $9 billion on acquisitions, only to see customers aggressively reduce capital spending after a plunge in prices for coal and iron ore.
Third-quarter net income rose to $1.63 a share from $1.45 a year earlier. Excluding one-time items, profit was $1.72, surpassing the $1.35 average of estimates compiled by Bloomberg.
Sales climbed to $13.5 billion from $13.4 billion, more than average estimate of $13.2 billion.
