Caterpillar shares jump despite earnings guidance cut

Caterpillar on Tuesday cut its forecast for full year earnings per share because of higher restructuring costs, even as it forecast stronger than expected sales and revenues for 2017, which could suggest a recovery in global markets for construction, energy and mining.
In its first earnings statement since federal agents raided three of its offices last month, Caterpillar said it expects earnings per share of about $2.10 for 2017, down from a previous full year forecast of $2.30 per share.

But the company, viewed as a bellwether for commodities and mining markets, raised its forecast of full year sales and revenues to a range of $38bn to $41bn, up from $36bn to $39bn previously forecast.

Caterpillar also reported first-quarter 2017 sales and revenues of $9.8bn, compared with $9.5bn in the year earlier quarter. But first quarter earnings per share fell to 32 cents for the quarter ended March 31, from 46 cents per share a year earlier.

“Restructuring costs expected in 2017 are significantly higher than the prior outlook primarily due to ongoing manufacturing facility consolidations,” the company said in a statement, adding that it expects to incur about $1.25bn in restructuring costs this year, up from $750m in its previous outlook, including recently announced plant closures in Illinois and in Belgium.

But Caterpillar was upbeat about sales.

“There are encouraging signs, with promising quoting activity in many of the markets we serve and retail sales to users turning positive for both machines and Energy and Transportation for the first time in several years,” said new chief executive Jim Umpleby in a statement. “While we are raising the full-year outlook for sales and revenues, there continues to be uncertainty across the globe, potential for volatility in commodity prices, and weakness in key markets.”

On Monday Caterpillar had reported stronger than expected global machine retail sales for the first quarter, up 1 per cent for the three months to end March, the first increase in more than four years.

Caterpillar shares rose 4.9 per cent in premarket trading after the first quarter results were released. The company’s sales have been hit by the prolonged global commodities and mining slumps but President Donald Trump’s promise of an infrastructure spending boom – which has yet to materialise – boosted the company’s shares after his election.
The company will face questions later today when it hosts a conference call with investors, over the raid of three of its facilities last month in Illinois, which appear to relate to its offshore tax strategy involving a Swiss subsidiary but could also include questions about its exports to sanctioned nations, legal experts said.