Caterpillar Shares Jump Even as the Company Cuts 2017 Earnings Guidance

On Tuesday, heavy industrial equipment maker Caterpillar reported stocks are up more than 6 percent in premarket trading, though they may have to cut full year forecasts on earnings per share due to higher than expected restructuring costs. If the company can hold onto these gains, though, analysts say Caterpillar could add 40 more points to its Dow Jones Industrial Average index score on the day.

Caterpillar CEO Jim Umpleby has commented, “Our team delivered outstanding operational performance and, for the first time in more than two years, same quarter sales and revenues increased. We’re also benefiting from our significant cost reduction and restructuring actions, which have improved cash flow and further strengthened an already healthy balance sheet.”

The company has also raised its guidance for the full year from $2.90 to $3.75 per share. Analysts had already anticipated a guidance of around $3.26 with an outlook shift from $38 billion, now to $41 billion.

Caterpillar says it expects modest growth in its construction business for this year, hoping to find strong recovery numbers in the Chinese market.

In a statement, the company has also said, “Restructuring costs expected in 2017 are significantly higher than the prior outlook primarily due to ongoing manufacturing facility consolidations,” adding that it expects incurring roughly $1.25 billion in restructuring costs in 2017 alone. This is vastly higher than its $750 million the company had previously estimated.

Still, the company remains optimistic. Outgoing Executive Umpleby also adds, “There are encouraging signs, with promising quoting activity in many of the markets we serve and retail sales to users turning positive for both machines and Energy and Transportation for the first time in several years.”

All in all, Caterpillar shares have rallied more than 17 percent since November, coinciding greatly with Donald Trump taking office in the White House. However, with Trump—and his largely Republican Congress—do not introduce any major infrastructure initiatives anytime soon, the company now worries it will not see any material benefits for at least another year.

Indeed, the com, the company has shared: “While we are raising the full-year outlook for sales and revenues, there continues to be uncertainty across the globe, potential for volatility in commodity prices, and weakness in key markets.”

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