Caterpillar Boosts Outlook But Says Steel Costs Are Rising

New York, (APP - UrduPoint / Pakistan Point News - 25th Apr, 2018 ) :Caterpillar significantly upgraded its full-year forecast Tuesday after first-quarter profits wowed Wall Street, but signaled earnings would moderate in the subsequent quarters in 2018.

Shares of the industrial machine maker, a Dow component, experienced a roller-coaster session, surging just after the company reported a big earnings jump but sagging after executives tempered the outlook in a conference call with analysts and said costs of steel and other materials had risen Near 1910 GMT, Caterpillar was down 5.7 percent to $145.28.

Chief financial officer Bradley Halverson said the just-completed quarter was "great," pointing to "strength in the global economy as well as favorable pricing for both commodities has benefiting many of our end markets." But Halverson said later in a conference call that the first quarter was the "high-water mark" for 2018, due in part to exceptionally low capital spending in the first quarter.

Halverson said cost inflation for steel and other materials would also weigh on results more as the year continues. In the first quarter, Caterpillar enjoyed exceptionally strong pricing on goods made from these materials that more than offset higher material costs; the pricing won't be as favorable later in the year, he said.

Halverson described steel and other commodity costs as a "headwind all year," but noted that many of the company's clients benefit from the higher commodity prices, leading to more investment. Caterpillar reported profits of $1.7 billion for the quarter ending March 31, dwarfing the $192 million in the year-ago period.

Revenues surged 30.9 percent to $12.9 billion. In the construction sector, Caterpillar pointed to "broad-based growth in all regions" in 2018, with North American and China especially strong. The mining industry, which had been in a bruising slump a couple of years ago, has picked up considerably, leading to higher capital spending by companies.

The company also predicted sales gains in oil and gas due in part to strong demand for well servicing and gas compression applications in North America. The figures are based on assumptions of continued global growth but it said potential effects from "future geopolitical risks and increased trade restrictions have not been included in the outlook." The company has been seen as vulnerable to a potential US-China trade war.