Caterpillar gains after retail sales rise for first time since 2012

Has Caterpillar finally dug itself out of its multi-year sales slump?

Shares in the US heavy-machinery maker rose by the most in 10 weeks on Monday after the company reported its first increase in three-month rolling machine sales in four-and-a-half years.

Worldwide machine sales reported by dealers rose 1 per cent for the three months to March, compared with the year-ago period, Caterpillar said in a regulatory filing. That’s the first three-month increase since November 2012, which sparked hopes among investors that demand for the company’s yellow loaders and excavators could at last be on the mend.

Caterpillar has cautioned in its recent quarterly earnings that the rebound in commodity prices over the past 12 months has yet to translate into an increase in equipment purchases. Mining companies have remained cautious and opted to trim costs by renting or buying used equipment.

Indeed, demand from the resource sector remains in the doldrums, with rolling three-month sales down 19 per cent in March. Demand has been coming instead from the construction sector in Asia, where sales are up 56 per cent year-on-year during the period. Another relative bright spot was the oil and gas sector. Sales of the engines, motors and pumps used in oil wells were up 15 per cent compared to the year-ago period.

The trading update comes a day before Caterpillar is due to report its first-quarter earnings. It sent shares in the company up as much as 2.8 per cent to $96.72.

The gain takes the stock’s advance over the past 12 months to more than 23 per cent. The rally comes despite the move by US law enforcement authorities to raid the company’s headquarters and two other facilities in Illinois earlier this year as part of a long-running tax investigation into financial transactions involving CSARL, a Caterpillar subsidiary in Switzerland.