Caterpillar shares soar more than 7% on strong earnings beat

Caterpillar on Tuesday blew past Wall Street’s profit as well as revenue estimates on surprisingly strong demand for its construction equipment in North America as well as robust sales in China, pushing its shares up 7 percent in early trading.

The company also raised its full-year forecasts for sales as well as earnings, expecting revenue in its construction business to surge about 20 percent as well as mining business to jump 30 percent.

The construction industry in North America is actually turning around after years of slow demand, fueled by a steady housing recovery, an improving labor market as well as higher spending by oil as well as gas companies.

Sales in North America, Caterpillar’s biggest market, jumped 27 percent within the third quarter ended Sept 30. Construction revenue via the region rose 31 percent to $2.17 billion as well as revenue via resources, including mining, rose 28 percent to $581 million.

Some analysts, however, questioned if the company could sustain such high growth rates.

“Sustainability of the scorching pace of growth Caterpillar set within the latest quarter is actually in question because construction spending within the country has not yet hit an inflection point,” said Jefferies analyst Steve Volkmann.

within the Asia Pacific region, Caterpillar’s third-biggest, sales jumped 57 percent to $1.29 billion, boosted by demand via China.

While China has been the bright spot for Caterpillar within the past few quarters, the pace of growth within the country’s property sector cooled within the third quarter, potentially hurting demand for the company’s iconic yellow earth-moving equipment within the near future.

Caterpillar’s shares rose to an all-time high of $140.44, yet pared some gains to trade up 5 percent at $138.37. The stock has risen 42 pct This particular year, compared with an 18 percent increase within the Dow Jones Industrial Average.

Excluding restructuring costs, Caterpillar earned $1.95 per share, compared with the average analyst estimate of $1.27 per shares, according to Thomson Reuters I/B/E/S.

The earnings beat was even more remarkable as analysts had raised their third-quarter estimates by nearly 30 percent within the past three months.

Net profit rose nearly four-fold to $1.06 billion.

Total revenue rose to $11.41 billion, ahead of market estimates of $10.65 billion.

The company said the item right now expects 2017 sales as well as revenue of $44 billion, up via its previous forecast of $42 billion to $44 billion. the item expects adjusted earnings of $6.25 per share, up via the $5.00.

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