What's going on?
American manufacturer Caterpillar capped off a great 2017 with the announcement on Thursday that its revenue in the fourth quarter jumped by 35% – and it expects to do even better in 2018.
What does this mean?
Caterpillar makes equipment for all kinds of heavy industry – and, like butterflies, it’s seen as a good indicator of how the (economic) environment is doing. After a few challenging years, Caterpillar has wormed its way out of trouble in spectacular style: its full-year revenue grew by about 18% in 2017, while profit almost doubled in the same period after intensive cost cutting.
Caterpillar also said it expects growth in all three of its major sales segments – construction, mining, and oil and gas – to increase, which the company expects will help it realize profit growth of up to 35% in 2018. Talk about a metamorphosis! (tweet this)
Why should I care?
For markets: Caterpillar’s stock price failed to transfigure on Thursday.
Last year, Caterpillar’s stock enjoyed its biggest jump in value in fourteen years, and it was one of the best performers among its industrial peers. But now that its turnaround seems to be nearing completion, it might be harder for Caterpillar’s stock to see the same kind of gains this year – and some are already warning that it’s overvalued.
The bigger picture: As global economic growth picks up, all kinds of industrial firms stand to benefit.
Also on Thursday, global manufacturer 3M reported record sales growth in the fourth quarter. American industrial firm Illinois Tool Works posted strong quarterly earnings on Wednesday, and anticipates an even stronger year ahead, while Boeing had a jet-fuelled 2017 as it saw orders for its planes pour in from around the world. One industrial company potentially missing out on the fun, however, is GE, where legacy costs and a struggling power unit are expected to weigh down the company in 2018.