Caterpillar Soars on Big Revenue and Profit Beats, Raised Forecast

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Caterpillar Inc. (NYSE: CAT) reported third-quarter 2017 results before markets opened Tuesday morning. The heavy equipment firm posted adjusted diluted earnings per share (EPS) of $1.95 on revenues of $11.4 billion. In the same period a year ago, the company reported adjusted EPS of $0.85 on revenues of $9.2 billion. Third-quarter results also compare to consensus estimates for EPS of $1.27 and $10.63 billion in revenues.

On a GAAP basis, Caterpillar posted net profit of $1.58 billion in the third quarter. Net profit totaled $481 million in the year-ago quarter.

Increased operating profit was primarily due to higher sales volume. Favorable price realization, lower restructuring costs and variable manufacturing costs were partially offset by higher period costs. Price realization was favorable, primarily in Construction Industries. Period costs were higher, primarily due to higher short-term incentive compensation expense. Despite a significant increase in sales volume, period costs excluding short-term incentive compensation expense were about flat.

Restructuring costs totaled $90 million in the third quarter, compared with $324 million in the third quarter of last year.

At the end of the first quarter, Caterpillar’s order backlog totaled about $15.4 billion. This represents a sequential increase of about $600 million. Compared with the year-ago quarter, total backlog increased by about $3.8 billion.

Caterpillar has raised its 2017 revenue forecast to $44 billion, up from a previous range of $42 billion to $44 billion. The profit outlook soared from an estimated adjusted EPS of $5.00 to a new estimate of $6.25.

CEO Jim Umpleby said:

Higher sales volume and our team’s focus on cost discipline resulted in improved profit margins across our three primary segments. As a result of our team’s strong performance, we are raising our 2017 profit outlook. We are executing our new strategy for profitable growth based on operational excellence, expanded offerings and services.

Caterpillar’s shares jumped nearly 7% in premarket trading to $140.85, above the 52-week range of $80.33 to $132.34. The 12-month consensus analyst price target was $129.75 ahead of this morning’s report.