Caterpillar profit tops Q4 estimates on strong sales

The US company expects stronger year-over-year sales this quarter

Caterpillar earned a full-year revenue of $41.7 billion in 2020. EPA

Caterpillar’s fourth-quarter earnings beat analysts’ expectations as reopening economies stoked demand for its signature yellow machines.

The company said it expects stronger year-over-year sales this quarter, led by construction industries.

The world’s biggest maker of mining and construction equipment posted adjusted fourth-quarter earnings of $2.12 a share, according to a statement on Friday. That compares with the $1.45 average of analysts’ estimates. Sales also topped expectations, while still falling below a year earlier.

Caterpillar’s stock is coming off its best quarter in three years in a bet on improving demand for machinery used in construction and infrastructure as economies recover from the coronavirus.

A broad rebound in commodity markets may mean the return of customers in the metals and oil-exploration businesses after pandemic shutdowns crushed orders.

“Our fourth-quarter and full-year results reflect the team’s agility in a challenging environment while executing our strategy for long-term profitable growth,” chief executive Jim Umpleby said in the statement.

“We are well-positioned for the future and will emerge from the pandemic as an even stronger company.”

There are signs of buoyant demand in building and manufacturing. US home construction rose in December to the best pace since late 2006, while Bloomberg Intelligence said China construction-machinery sales may reach a record high in 2021. Meanwhile, orders placed with US factories for business equipment rose in December for an eighth straight month.

Full-year revenue in 2020 was $41.7 billion, down 22 per cent from 2019. The decline reflected lower end-user demand and dealers reducing their inventories by $2.9bn in 2020.

Risks for the economic bellwether in 2021 include rising steel prices, continuing threats to mining activity from the pandemic and sharper competition in Asia.