Caterpillar earnings top estimates as price gains offset supply costs

(Image courtesy of CAT Products | Instagram)

Caterpillar Inc. raised prices to stay ahead of increasing raw-materials costs and worked with suppliers to alleviate bottlenecks, highlighting inflation and supply-chain pressures.

The producer of construction and mining equipment reported adjusted fourth-quarter earnings of $2.69 a share, compared with the $2.27 per share average of analysts’ estimates compiled by Bloomberg. Sales rose 23% to $13.8 billion.

The results from Caterpillar, considered an economic bellwether, come as worries over inflation mount, with the prospect of interest-rate hikes from the Federal Reserve and some other central banks. The company said Friday it anticipates higher prices to offset manufacturing cost increases in 2022.

Caterpillar expects “very strong” overall demand to continue through 2022, even as it sees China construction orders slowing, Chief Financial Officer Andrew Bonfield said in an interview. Mining orders will get a boost as the shift to low-carbon energy sources fuels demand for metals such as copper, and construction will get a lift with non-residential building in the U.S. starting to pick up, he said.

Still, the company also said it expects “headwinds” to adjusted operating profit margin in the first quarter compared with a year earlier. And Caterpillar said late last year that supply-chain snags will make it more difficult to meet customer demand.

“The challenge, on the other side, is the supply chain,” Bonfield said. “So it’s well publicized: the freight bottlenecks, ongoing impacts of Covid, as well as things like electronics and semi conductors are all challenges we’re all having to deal with. It’s a challenge and there are occasional wild cards.”

Analysts see mining orders continuing to improve after years of low investment by customers in the industry that is an important source of profit for Caterpillar.

Caterpillar shares rose 14% last year and have posted three consecutive annual gains. 

The earnings were announced before the start of regular trading in New York. Caterpillar shares slipped 2.4% at 7:49 a.m.

(By Joe Deaux)

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