PEORIA — Caterpillar Inc. posted its strongest quarterly sales and revenue growth in nearly six years on Tuesday with an unexpectedly positive third-quarter earnings report, pushing shares nearly 5 percent higher and helping the Dow reach record territory by day's end.
Sales and revenue grew more than $2 billion from the third quarter of 2016 to reach $11.4 billion, and Cat once again revised its annual outlook upward — to $44 billion for all of 2017 from the previous forecast of $43 billion. Caterpillar posted $38.5 billion in sales last year, at the tail end of the longest downturn in company history.
Profit per share for the third quarter was $1.77, up from 48 cents per share in the same period last year. The company now predicts profit per share for all of 2017 will be about $4.60. Adjusted profit figures are $1.95 for the quarter and $6.25 for the year.
Both sales and profit figures for the third quarter beat analyst expectations by wide margins, leading Wall Street to bid up Cat shares nearly 5 percent to a record high closing price of $138.24 per share on Tuesday. The gain helped push the Dow Jones Industrial Average up 167.8 points to also close at a record high 23,441.76 points.
Higher sales volume in all segments of the company contributed to the jump in revenue, with construction industries sales up 37 percent compared to the third quarter of 2016.
"Overall, we're seeing broad-based sales increases across a number of industries in all regions. ... Our profit margins continued to improve in our three primary segments," CEO Jim Umpleby told analysts and investors on Tuesday.
Umpleby continued: "The improved margins are driven by higher sales volume, price realization, primarily in construction industries, and our team's focus on cost discipline."
In North America, an increase in construction equipment sales was driven by demand in the oil and gas industry and improvement in residential construction, CFO Brad Halverson said.
Elsewhere in the world, sales in China continued to be what Halverson called a "bright spot." Those figures extended an upward trend that has consistently made the Asia and Pacific region the top area for growth this year.
"Our current estimate for 2017 is for the 10-ton and above excavator industry in China to more than double versus last year, which would result in sales that are higher than our estimate of normal replacement demand for the region," Halverson said.
By the end of the year, Caterpillar predicts all three of its primary business segments will have experienced double-digit sales growth compared to the previous year — 20 percent in construction industries, 30 percent in resource industries and 10 percent in energy and transportation.
Some of those figures, however, still represent historically low levels despite the seemingly significant growth. The final 2016 sales and revenue figure was more than 40 percent below the peak period in 2012 and off by one third from levels reached in the years around the peak. The sales and revenue growth from third quarter 2016 to 2017, however, was the strongest since the fourth quarter of 2011, Halverson said.
The company did not provide a forecast of sales and revenue for 2018 on Tuesday. Halverson told investors it was too early to comment on next year, and Caterpillar would provide guidance when it releases fourth quarter and year-end results in January.
Matt Buedel can be reached at 686-3154 or firstname.lastname@example.org. Follow him on Twitter @JournoBuedel.