Caterpillar profit surges as machine demand jumps

CATERPILLAR posted a first-quarter profit that exceeded analysts’ expectations, a sign that economic weakness around the world has failed to dent demand for heavy equipment.

The Irving, Texas-based company reported adjusted earnings per share of US$4.91, beating the US$3.82 average estimate of 23 analysts polled by Bloomberg. Caterpillar’s machines are critical to the construction, mining and energy industries, and it’s viewed as bellwether for the global economy.

Caterpillar is one of the biggest producers of heavy machinery, with its iconic yellow diggers and bulldozers dotting construction sites, mines and oil fields in every corner of the globe. But doubts have begun to creep in about construction demand in North America, Caterpillar’s biggest segment. That’s been exacerbated by the regional banking crisis and concern over the US economy, leaving executives worried about a late-year slowdown.

There was “healthy demand during the first quarter”, chief executive officer Jim Umpleby said in a statement.

Sales volumes of construction equipment in North America rose as dealers boosted their inventories of machines, the company said. Similarly, mining equipment sales rose but was partially offset by higher manufacturing costs, especially for materials.

Since the pandemic began, Caterpillar has battled rising freight rates, surging materials costs and a global supply chain crisis, which all ate into profit margins. The company has repeatedly raised prices to offset these headwinds. Shares are down more than 9 per cent this year despite assurances from Caterpillar and other machinery producers that customer demand will remain strong through the year.

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Analysts at Jefferies expect infrastructure projects and other government investments to offset any weakness in the construction industry, along with anticipated demand growth in the mining and energy industries.

Caterpillar shares rose 3.2 per cent to US$223 before the start of regular trading in New York. BLOOMBERG