Beneath all the earnings noise from Wall Street on Thursday, industrial equipment major Caterpillar Inc. (NYSE: CAT) came out with its widely followed assessment about the state of the world economy. The company is projecting global GDP to grow at 2.7 percent in 2015, up from 2.6 percent last year.
Global Economy Facing 3 Key Risks
According to Caterpillar, global economy faces three key risks:
- Uncertainty surrounding the direction and timing of U.S. fiscal and monetary policy.
- The ongoing structural reforms in China that could further hit growth.
- Political unrest could disrupt economic activity in Africa and Middle-East.
Overall, Caterpillar expects developed countries to lead economic growth this year, with emerging economies likely to grow at a rate slightly below that of 2014.
Caterpillar Earnings, Sales Beat Wall Street Expectations
On the earnings front, Caterpillar reported better-than-expected quarterly numbers despite weaker sales, and gave a grim outlook for the rest of the rest of the year, largely on account of weak oil prices and the strength in the U.S. dollar.
But the company reaffirmed its 2015 sales outlook and marginally raised its full-year EPS estimate, lifting shares by more than 4 percent in morning New York trade.
Caterpillar maintained its revenue outlook of $50 billion for 2015 and said it expects earnings for the year to be around $4.70 per share, up from its prior forecast of $4.60 per share.
Caterpillar warned that a strong dollar is lowering the cost of imported goods, especially from Japan, and that could reflect on results through the rest of the year. The construction and mining equipment maker expects profit and revenue for the remaining three quarters to be lower than the current quarter.
Caterpillar posted first-quarter profit of $1.11 billion or $1.81 a share, which marks a 20 percent jump from $922 million or $1.44 a share in the year ago period. Excluding one-time items, earnings per share stood at $1.86. Analysts polled Thomson Reuters were expecting first quarter earnings per share of $1.35.
The stronger than expected quarterly profit came despite a 4 percent dip in revenue to $12.7 billion from $13.24 billion in the same period last year. However, that figure managed to beat the average analysts’ estimate of $12.38 billion.
While North American sales were up 9 percent y-o-y, it was not enough to offset the decline in revenues from the rest of the world.
Revenue from Caterpillar’s energy and transportation business increased modestly, but the company said that, given the drop in oil prices, that trend is unlikely to continue