Caterpillar Inc. (NYSE:CAT) stock climbed Monday after the Illinois-based heavy machinery maker posted stellar second-quarter earnings that handily beat Wall Street analyst expectations.
Shares in Caterpillar, considered the bellwether of the global economy, rose nearly 0.6% to US$143.41.
For the quarter ended June 2018, the heavy equipment manufacturer, reported earnings of US$2.97 per share on revenue of US$14bn. This beat consensus earnings estimates of US$2.66 per share on revenue of US$13.8bn. Revenue grew 23.7% on a year-over-year basis.
READ: Caterpillar earnings beat, but shares tumble after CFO sees 1Q as 'high water mark for the year'
“Caterpillar delivered record second-quarter profit per share," CEO Jim Umpleby said in a statement. "Based on outstanding results in the first half of the year and continued strength in many of our end markets, Caterpillar is again raising our profit outlook for 2018."
Caterpillar’s earnings of US$2.97 per share were nearly twice as high than that of a year earlier.
The company raised its full-year profit forecast to a range of $11 per share to $12 per share, an increase of US$0.75 per share from previous guidance.
Caterpillar gave this higher forecast despite signs the trade war and rising costs due to tariffs would take its toll. It expects an impact of US$100mln to US$200mln on material costs in the second half of this year.
The company said it will offset those impacts with price increases this year. The higher tariff costs represent about 3% of the company's expected full-year profits.
Caterpillar also authorized an increase to its quarterly dividend, raising the payout by 10% to US$0.86 per share.
American companies flush with cash from the $1.5 trillion tax cut have been buying a record quantity of their own shares. Caterpillar was no different as it repurchased US$750mln of stock in the second quarter, after repurchasing US$500mln in the first quarter. It expects share repurchases in the second half of 2018 to continue at about the same pace.
Contact Uttara Choudhury at uttara@proactiveinvestors.com
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