Caterpillar Beats Earnings Estimates on Strong Equipment Demand; stocks go up

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By Bianca Flowers and Aishwarya Nair

(Reuters) – Heavy-duty equipment maker Caterpillar Inc beat Wall Street estimates for third-quarter profit and revenue on Thursday on higher prices and strong order activity from energy customers and mines.

Shares of the world’s largest maker of construction and mining equipment rose 8.5% after announcing that its net profit had reached $2.04 billion, beating analysts’ estimates of $1.68 billion of dollars. Industry Barometer revenue rose to $15 billion, beating forecasts of $14.3 billion, according to Refinitiv.

Caterpillar, based in Deerfield, Ill., raised prices to help ease supply chain constraints and rising raw material and freight costs, dampening profits.

“We’re wrapping up some price increases that we saw in the third quarter – fourth quarter of last year,” Chief Financial Officer Andrew Bonfield said in a call with analysts. “We will see a slight moderation in prices in the fourth quarter, still very strong.”

Executives said labor costs and manufacturing inefficiencies remain challenges.

“They’ve gotten a little worse instead of better over the last quarter,” general manager Jim Umpleby said.

Umpleby said that despite parts and semiconductor shortages, the company continues to see healthy demand and meet its margin targets.

With the company exposed to currency headwinds amid global recession fears, strong demand for equipment has “more than offset” uncertain economic conditions, said Edward Jones analyst Matt Arnold.

Operating margins increased across the company’s three main divisions, with construction leading the way with a 19.4% increase over the previous year.

In the prior quarter, Caterpillar reported a larger decline in demand for its excavators in China, a growing market.

Construction equipment revenue in the Asia-Pacific region increased 1% year-on-year. Slumping sales in China weighed on manufacturer margins as developers halted or delayed construction of pre-sold homes due to debt concerns.

A delayed release of economic data from China showed the economy was losing momentum as COVID-19 lockdowns, plummeting property values ​​and constrained consumption slowed the world’s second-largest economy.

With drilling activity booming in the first half of the year amid soaring oil and gas prices, Caterpillar’s resources division saw the largest increase in sales, up 30%.

Caterpillar’s adjusted earnings rose to $3.95 per share, beating estimates of $3.16 per share.

(Reporting by Bianca Flowers in Chicago and Aishwarya Nair in Bengaluru; Editing by Arun Koyyur, Bernadette Baum, Will Dunham and Tomasz Janowski and Marguerita Choy)

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