Caterpillar sales jump 18% in 2017 with 4Q surge

Updated Jan 29, 2018
Body and swing sensors on the 320 and 323 excavators enable the operator to create virtual E-fences and E-ceilings to prevent the boom or bucket from striking surrounding objects or swinging out into traffic.Body and swing sensors on the 320 and 323 excavators enable the operator to create virtual E-fences and E-ceilings to prevent the boom or bucket from striking surrounding objects or swinging out into traffic.

Caterpillar announced its fourth quarter and full-year 2017 sales Thursday, reporting a 35-percent increase in sales for the quarter and an 18-percent increase in sales for the year.

Cat’s 4Q sales climbed from $9.6 billion a year ago to $12.9 billion in 2017. Despite the strong sales, the company still posted a loss per share of $2.18 during the quarter. However, Cat places the adjusted profit per share at $2.16. This adjustment accounts for “mark-to-market losses for remeasurement of pension and OPEB plans, state deferred tax valuation allowance adjustments, a gain on sale of an equity investment in 2017 and a goodwill impairment charge in 2016,” and the positive impact of the tax reform bill recently passed by Congress and signed by President Trump.

Full year sales rose to $45.5 billion, while profit shot from $139 million in 2016 to $4.1 billion in 2017. Profit per share rose from a loss of 11 cents in 2016 to $1.26 per share. Adjusted profit per share for the year was $6.88.

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“After four challenging years, many key markets improved in 2017, and our global team delivered strong results. We remained focused on operational excellence and made early investments in profitable growth initiatives as we began to implement our new strategy,” Caterpillar CEO Jim Umpleby said in a statement.

Construction equipment sales rose 47 percent during 4Q to $5.25 billion due to higher end user demand for machines, Cat says. North American construction sales jumped 50 percent to $2.3 billion on higher demand from oil and gas, residential and non-residential construction projects.

And there was continued good news on the mining equipment side with Cat’s Resource Industries division seeing a 53-percent surge in sales to $2.2 billion with North American mining sales up 68 percent to $791 million. “After several years of low investment, miners began to increase capital expenditures, reflecting more confidence in their end markets,” according to the Cat earnings report.

3Q strong

The news comes after Cat boasted extremely strong 3Q results in October. At that time, sales and revenues saw a 25 percent year-to-year gain, rising to $11.4 billion for the quarter, up nearly $1.3 billion from 2016’s third quarter. In just North America, sales jumped 27 percent, thanks to higher end-user demand for machines and aftermarket parts.

Cat said the strong 3Q performance was the result of gathering strengths in several quarters, including China’s construction industry, North America’s onshore oil and gas market and global mining customers. And the company announced that product availability had become a concern in some areas, causing the firm to ramp up production. In addition, the 3Q results were the strongest quarter-over-quarter in terms of sales and revenue growth since 4Q 2011.

In addition to higher end-user demands, Cat also credited favorable changes to dealer inventories as an underlying reason for its strong 3Q results. In the four years prior, Caterpillar dealers had reduced their inventories by more than $6 billion.

In announcing its 3Q results, Cat said it expected total 2017 sales to reach about $44 billion, improving its full-year outlook from $42 billion, which it had announced in July.

2018 likely to bring more growth

Cat says it has begun 2018 “with strong sales momentum resulting from strong order rates, lean dealer inventories and an increasing backlog.” The company says it is preparing its factories and suppliers “for continued growth, while remaining focused on managing a flexible and competitive cost structure that should enable the company to respond quickly if economic fundamentals change.”

Cat expects profit per share to rise to a range of $7.75 to $8.75. Adjust profit per share, which excludes expected restructuring costs of about $400 million, is expected to be in a range between $8.25 and $9.25.

Cat is expecting continued growth in construction equipment sales due to increased demand from North American residential, non-residential and infrastructure projects—and Cat says this expectation does not hinge on whether an infrastructure bill like the one promised by the Trump administration comes to fruition or not.

The company also expects mining equipment sales to increase in 2018, anticipating “miners’ capital spend to increase as mining businesses invest in equipment replacement cycles.” The company notes that higher machine utilization from mining companies “should support continued strong aftermarket parts opportunities.”

“We are in the early stages of implementing our strategy for profitable growth. In 2018, we expect to make additional investments in the expanded offerings and services important for Caterpillar’s long-term success. We will use our Operating & Execution Model to bias resources to areas that represent the greatest opportunity for return on our investments,” Umpleby says. “Our focus on operational excellence will not waver as we work to develop a more competitive and flexible cost structure, including implementing lean manufacturing principles. We are positioned to capitalize on continued sales momentum or quickly adjust should conditions change.”


Editor’s Note: Marcia Gruver Doyle contributed to this report.