OMAHA, Neb. – Caterpillar says the global economy is clearly improving, so it's planning to increase production of its mining equipment after reporting a strong first-quarter profit on Monday.
The Peoria, Ill., company offered an encouraging view of the economy and predicted worldwide growth of about 3.5 percent. But Caterpillar has still only hired back about 2,000 people since eliminating 19,000 full-time jobs and about 18,000 contract and part-time workers last year.
Caterpillar Chairman and CEO Jim Owens said industry activity and orders are significantly higher than last year and are at record levels in some areas. As a result, Caterpillar is ramping up production to meet increasing demand.
After the company's earnings report, Caterpillar's shares jumped more than 4 percent to top $70 for the first time since 2008.
Caterpillar expects the most growth this year in developing areas like Asia and Latin America. The company's iconic yellow-and-black machinery is sold in so many places and used by so many industries that its results are considered an indicator of the economy's health.
"We're in a revival. There's no doubt about it," Chief Financial Officer Dave Burritt said. "We're heading up, and it's driven by the emerging markets. No doubt."
Edward Jones analyst Jeff Windau said Caterpillar is reaping the benefits of the cost cutting it did last year, and the company's results definitely show the economy is improving.
"I think they did a great job managing through the downturn," he said.
Caterpillar boosted its profit outlook to between $2.50 and $3.25 per share. That's up from $2.50 per share.
Caterpillar also increased its sales and revenue forecast to between $38 billion and $42 billion; previously, it predicted sales and revenues between $35.6 billion and $40.5 billion.
Caterpillar said it's main concern is that central banks in the United States, Europe and elsewhere might raise interest rates too soon and cause another downturn, but the risk of that is low.
During the first quarter, Caterpillar earned $233 million, or 36 cents per share compared with a loss of $112 million, or 19 cents per share, a year earlier, when the recession and ensuing layoffs hurt results.
Excluding a health care tax accounting charge of $90 million, the Peoria, Ill., company would have earned a 50 cent per share.
Without the financial hit related to the new health care law, Caterpillar easily beat the expectations of analysts surveyed by Thomson Reuters, who were looking for earnings per share of 39 cents.
Caterpillar's revenue fell 11 percent to $8.2 billion, which was short of expectations. But the revenue and profit outlook surprised many and company shares jumped $3.20 to $71.98 in afternoon trading.
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