(Bloomberg) — Caterpillar Inc. batted away concerns of a global economic slowdown, with higher fourth-quarter sales in its energy and transportation business helping the global machinery maker post profit that topped analysts’ expectations.
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The economic bellwether also signaled a more rosy outlook for 2024, as inventories of its machines at dealerships shrunk — a sign that customers are starting to buy more equipment than Caterpillar is producing. Dealer inventories in the fourth quarter fell by about $900 million from the prior three-month period.
Shares of the Irving, Texas-based company rose 4.6% at 7:55 a.m. in premarket trading in New York.
Caterpillar also saw a jump in sales from selling equipment including drill rigs, gas compressors and locomotives to energy and transportation industries, topping expectations and helping the firm counter slower sales in construction and resources. That helped the maker of iconic yellow bulldozers post adjusted per-share earnings of $5.23, topping the $4.73 average estimate of analysts polled by Bloomberg.
Caterpillar is one of the world’s biggest producers of heavy machinery. The earnings come as economists worry that rising borrowing costs are putting a cap on spending in everything from washing machines to skyscrapers.
Caterpillar said it expects its full-year adjust operating profit margin for this year to be in the top half of its target range, an indication the company is shrugging off concerns of an economic slowdown.
The company said in a presentation it expects to increase prices this year, offsetting the higher costs of raw materials needed to manufacture equipment. Sales will be broadly in line with 2023. Caterpillar also expects machine inventories at its dealerships to be little changed, allaying concerns among investors that a lack of consumer purchases would lead to a build up in those stockpiles.
Investors have paid close attention to Caterpillar’s inventory of machines, which rose last year, indicating customers weren’t buying as much equipment.
(Adds details on dealership inventories from second paragraph.)
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