Caterpillar's profit trounces estimates; shares jump

By Ankit Ajmera (Reuters) - Caterpillar Inc's quarterly profit crushed estimates and the company raised its sales forecast, encouraged by an improvement in its end-markets, sending its shares to their highest in more than three years. The strong outlook signalled a rebound in Caterpillar's business, which has been battered in the past few years by a slump in oil and commodity prices as well as weakness in China and other emerging markets. "There are encouraging signs," Chief Executive Jim Umpleby said in a statement, adding that the company was benefiting from its cost-cutting measures. To cope with the downturn, the company has cut costs, shuttered factories and reduced its workforce. Last year itself, Caterpillar cut more than 12,000 jobs. The company's stock was up 7 percent at $103.57 in afternoon trading on Tuesday, making it the top gainer on the Dow Jones Industrial Average. Caterpillar's total sales and revenue rose 3.8 percent to $9.82 billion (7.66 billion pounds) in the first quarter, the first increase in more than two years. The increase was mainly due to an 11 percent rise in sales from the Asia-Pacific region, its third-biggest market, which is benefiting from increased government spending on infrastructure and residential construction. However, sales in North America and the Europe, Africa and Middle East region, its two biggest markets, were largely flat. Analysts cautioned that Caterpillar was not out of the woods yet despite posting stellar first-quarter results. "With the commodity recovery faltering and with Chinese support for its property and infrastructure potentially fading, the sustainability of these growth drivers may be at risk," Jefferies analyst Stephen Volkmann wrote in a note to clients. The results come a day after Caterpillar reported its first three-month growth in global machine sales in more than four years, driven by an improvement in the Asia-Pacific region. The resource industries business, which makes mining equipment, was a bright spot, while sales growth in the construction industries business, the company's biggest, was held back by a glut of used equipment in the North American market. But orders in the unit were "very strong" in the region, contributing to an increase in the backlog at the end of the first quarter, CFO Bradley Halverson said in a post-earnings call. "We believe business optimism, which may be contributing to elevated quoting and ordering activity in North America, is partially a reflection of the benefits of pro-business policy in regards to infrastructure and tax reform," Halverson said. President Donald Trump has proposed massive spending on infrastructure as well as simpler tax regulations for companies. Caterpillar said it now expects 2017 adjusted earnings of $3.75 per share, up from the $2.90 it had previously forecast. It forecast sales and revenue of $38 billion-$41 billion, up from $36 billion-$39 billion. Analysts on average were expecting 2017 earnings of $3.26 per share, on revenue $38.27 billion, according to Thomson Reuters I/B/E/S. Excluding restructuring costs, Caterpillar earned $1.28 per share, compared the average analyst estimate of 62 cents per share. (Reporting by Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty)