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By Rachit Vats and Siddharth Cavale
(Reuters) – Caterpillar Inc. has appalled investors for a second consecutive quarter, as rising costs affected margins in its construction equipment business and cautious sales in the Asia-Pacific region, indicating continued moderate growth in China.
The company's shares, considered an indicator of economic activity whose results often influence the sentiment of the global stock markets, fell by 4%, canceling their initial rise due to overall results flattered by a gain in equity. 39; tax.
The latest results came after the world's largest heavy equipment manufacturer warned in the fourth quarter that construction activity in China could slow down after two years of strong growth.
Chief Financial Officer Andrew Bonfield, however, said on Wednesday that the sector had recorded stronger than expected activity in China ahead of the Chinese New Year, although sales for the year would remain stable for Caterpillar in the region.
<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "China represents up to 10% of the capital The company is key to its growth prospects, as it is one of the largest commodity importers in the world. https://in.reuters.com/article/us-china-economy-gdp/chinas-first-quarter-quarter-growth-unexpectly-steadies-but-too-early-to-call-clear-recovery-idINKCN1RT04P in China, the first quarter, after a net slowdown in the previous quarter, added to the optimism that the country's economy could begin to stabilize. "data-reactid =" 27 "> China accounts for up to 10% of the company's sales and is critical for its growth prospects as it is one of the world's largest commodity importers Sustained growth https://in.reuters.fr/article/us-china-economy-gdp/chinas-first-quarter-growth-unexpectedly- China, which experienced a first slowdown in the first quarter after a sharp slowdown in the last quarter, added to the optimism that the country's economy was starting to stabilize.
Caterpillar said that construction equipment sales in the Asia-Pacific region were stable in the first quarter, ignoring the impact of the currency. They dropped 4% on a reported basis.
"It's in the construction industry that Caterpillar is the most exposed in China and that its sales and margins were a bit disappointing," said Stephen Volkmann, an analyst at Jefferies.
The operating margin for construction equipment, Caterpillar's largest, increased from 19.7% a year earlier to 18.5% due to higher manufacturing and transportation costs.
The company announced a turnover of $ 5.87 billion for construction in the first quarter, thus missing analysts' expectations, estimated at $ 5.95 billion, according to Refinitiv IBES.
Still, overall sales grew by about 5% to $ 13.5 billion and exceeded estimates with a 7% increase in sales in North America, its largest market.
The company also raised its earnings guidance for the full year, recording first-quarter capital gains related to tax reforms.
Caterpillar announced a 2019 profit of $ 12.06 per share at $ 13.06 per share, against a forecast of $ 11.75 to $ 12.75 per share.
Excluding tax gains, the company maintained its profit targets for 2019.
The company announced adjusted earnings of $ 2.94 per share in the first quarter, exceeding the analysts' average estimate of $ 2.85 per share.
Shares of the company fell 3% to $ 138 in the morning. The equity portion of the Dow Jones Industrial Average was the main drag on the index.
(Report by Rachit Vats, Siddhartha Cavale and Sanjana Shivdas in Bengaluru, edited by Saumyadeb Chakrabarty)
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