Sluggish economic growth around the world remains a problem, and Caterpillar's operating profit ($1.4 billion) and revenue ($13.5 billion) were basically flat from a year ago, but the company managed to grow earnings per share to $1.63 -- $1.72 when excluding restructuring costs -- from $1.45 a year ago. That figure easily beat the consensus call for $1.34, which made Wall Street happy and sent Caterpillar shares up more than 4% in pre-market trading.
Even better, Caterpillar hiked its full-year earnings forecast to $6.00 per share -- $6.50 absent restructuring costs -- from a prior outlook of $5.75. That marks a reversal from a previous guidance update, which knocked a dime off January's $5.85 forecast. Take the figures with a grain of salt though, as forecasting global economic growth is a tricky business.
Caterpillar cited "growth-oriented monetary policies" in developed economies, along with stabilizing interest rate policies in emerging markets and potential infrastructure investments as the backbone of its expectation there is "a reasonable likelihood that world economic growth could improve in 2015."
Still, Chairman and CEO Doug Oberhelman isn't counting on economic growth alone. "We are confident that, when we see more significant economic growth around the world, our consistent focus on operational performance will have prepared us to deliver better results," Oberhelman said, but Caterpillar's 2015 call for sales and revenue to be basically flat with the current fiscal year doesn't make for much of a bet on that economic improvement happening.
Instead, Caterpillar is focused on improving "operational exectuion" and deploying capital back to shareholders. In 2014, the company has repurchased $4.2 billion worth of stock and upped its quarterly dividend payout by 17%, for a current yield just shy of 3%.
S&P Capital IQ analyst Jim Corridore said he was "impressed by CAT's ability to grow EPS on weak revenue growth," in a note to clients Thursday morning, and thinks the company is poised for valuation expansion -- it currently goes for about 15 times next year's earnings estimates -- on any signs of better economic growth.
Given mounting concerns about the pace of global growth, Caterpillar's measured optimism is a positive sign for the market that follows earlier manufacturing reports out of China and the eurozone that showed modest improvement. The eurozone purchasing managers index rose to 50.7 in October with economists expecting a drop to 49.9, while Chinese PMI climbed to 50.4 in September.
Shares of Caterpillar opened 3.3% higher at $97.69 Thursday morning.