Caterpillar Inc (CAT.N) on Thursday posted a quarterly profit that topped analysts' estimates and raised its full-year outlook on a stronger-than-expected rebound in sales to the construction industry.
The news sent shares of the world's largest maker of earth-moving machinery up 4.0 percent to $107.20 in trading before the market opened.
Caterpillar said it expected its sales to the global construction industry to increase 10 percent from 2013, up from a previously anticipated rise of about 5 percent.
But it cautioned that 2014 would be "another very tough year" for mining, another key market, and that its outlook reflected an anticipated drop of about 80 percent in sales of large mining trucks from the company's peak year in 2012.
Adam Fleck, an analyst at Morningstar, said he was pleasantly surprised by the company's "very solid cost control in construction in particular," where operating margins continued to grow and "were at their highest quarterly level in several quarters", even though they were typically more compressed than in the mining equipment category.
Fleck said the weakness in mining "wasn't terribly surprising" and added that because that once-critical business accounted for just 17 percent of sales and 12 percent of operating profit in the first quarter, any continued weakness in the sector was "more of a headline risk than a true economic one."
The better-than-expected report was tinged with caution. Chief Executive Officer Doug Oberhelman said the Peoria, Illinois-based company was watching several regions closely. Having visited China recently, he said the construction industry there was facing challenges.
Caterpillar was also concerned about the situation in Ukraine and Russia, he added.
"We are hoping for a peaceful resolution, but business confidence around the world could dampen, and trade and world GDP could slow should the situation deteriorate," Oberhelman said. "The global economy remains fragile, and as such, one or two setbacks could create substantial downside risk for the global economic recovery."
The company posted a first-quarter net profit of $922 million, or $1.61 a share, compared with $880 million, or $1.32 a share, a year earlier.
With restructuring costs factored in, Caterpillar made a profit of $1.44 a share.
Revenue at the company, which also makes locomotives and diesel and turbine engines, was little changed at $13.24 billion.
Analysts on average expected a profit of $1.24 a share on sales of $13.15 billion, according to Thomson Reuters I/B/E/S.
FULL YEAR EARNINGS OUTLOOK UP
Caterpillar raised its full-year earnings outlook to $6.10 per share from $5.85, citing growing demand from builders. Oberhelman warned, however, of "a range of macro-economic and geopolitical uncertainties that could slow the growth of global GDP" and upend Caterpillar's new forecast.
The company also kept its forecast for full-year revenue unchanged at about $56 billion, plus or minus 5 percent, and said that it would continue to work to restructure its operations to cut costs. It said those efforts would be "widespread across the company" throughout 2014 and would cost the company between $400 to $500 million and negatively impact of full-year earnings by 50 to 60 cents a share.
In the first quarter, the company spent $149 million on restructuring efforts, Caterpillar said, primarily related to a reduction in workforce at plant in Belgium.
(Reporting by James B. Kelleher in Detroit; Editing by Jeffrey Benkoe and Lisa Von Ahn)