Nation & World

Caterpillar's growth seen as good sign for economy

Machinery maker long seen as bellwether

Reuters

Caterpillar projects growth in its construction and mining-equipment businesses, forecasting increased sales to China and expansion in North America.
Reuters Caterpillar projects growth in its construction and mining-equipment businesses, forecasting increased sales to China and expansion in North America.

If you want more evidence of a broadening expansion in the global economy, look no further than Caterpillar.

Surging Chinese demand and an improving U.S. economy have lifted sales of Caterpillar’s signature yellow mining and construction machines. Now, with the pace of growth quickening in Latin America and Europe, the company is projecting higher earnings for 2018 than analysts estimated.

The outlook from Deerfield, Ill.-based Caterpillar, considered an economic bellwether, comes as industries from manufacturing to services report increased sales and orders that have fueled record equity prices and buoyed investor expectations for this year.

This week, the International Monetary Fund raised its estimate for 2018 global growth to the fastest in seven years.

“Caterpillar’s results showed strength across the board in nearly every industry for the first time, which indicated coordinated and synchronized macroeconomic growth,” said Larry De Maria, an analyst at William Blair and Co. “It’s a good harbinger for overall economic activity.”

Caterpillar on Thursday projected growth in its construction and mining-equipment businesses, forecasting increased sales to China and expansion in North America, even without a U.S. infrastructure bill. Its 2018 forecast for earnings of $8.25 to $9.25 a share.

Estimates for Caterpillar earnings had risen 16 percent the past three months, the most in the Dow Jones Industrial Average, amid signs of improving demand across the globe. Caterpillar, which in December capped the biggest annual gain in its shares since 2003, raised its 2017 revenue projections three times last year.

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“After four challenging years, many key markets improved in 2017,” Caterpillar CEO Jim Umpleby said in the statement.

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