DEERFIELD, Ill. – (Reuters) – Caterpillar Inc on Friday reported higher quarterly earnings as a recovery in global economic activity from pandemic lows drove up sales across all regions and businesses.
However, the Illinois-based manufacturer of heavy machinery did not provide an earnings forecast for this year. It also warned that operating profit margin would moderate in the current quarter because of rising freight and raw materials costs as well as higher marketing and R&D spending.
In an interview, Chief Financial Officer Andrew Bonfield said the company still faces supply chain challenges and is using innovative ways such as securing supplies from non-traditional sources to deal with shortages of resin and semiconductors.
“It is a challenge, and we are dealing with it,” he said.
Caterpillar is prioritizing orders that dealers have received from customers over those placed to replenish stocks at showrooms. As a result, Bonfield said the company does not expect a significant change in dealer inventory this year.
In response to inflationary pressures, the company has increased prices twice this year.
Caterpillar’s shares, which have outperformed the broader blue-chip Dow Jones Industrial Average with a gain of about 18% this year, were down 2.4% at $207.42 in pre-market trade.
The company, an industrial bellwether and proxy for global economic activity, has been benefiting from higher infrastructure spending around the globe.
The global economy is expected to expand at 6.0% this year and 4.5% in 2022, according to Reuters polls but a majority of the economists flagged the latest coronavirus variants as the biggest risk to the outlook.
A run-up in commodity prices is also encouraging miners to invest in new machines.
Caterpillar expects demand to remain strong in the current quarter.
Adjusted profit for the second quarter came in at $2.60 per share, up from $1.27 per share a year earlier. Analysts surveyed by Refinitiv, on average, expected earnings of $2.40 per share.
Equipment sales rose 31% year-on-year in the quarter to $12.2 billion, helped by stronger demand in North and Latin America.
Second quarter sales and revenues totaled $12.9 billion, up 29 percent from last year.
(Reporting by Rajesh Kumar Singh in Chicago and Abhijith Ganapavaram in Bengaluru; Editing by Sriraj Kalluvila and Louise Heavens)
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