Bustling construction sites, active drilling for energy and re-engagement in mines and other heavy industries doubled third quarter profits at Caterpillar and drove sales up 25% as the global economy emerges from a pandemic.
Executives with the heavy machinery company said that sales, which were shy of Wall Street expectations, would have been stronger if not for global supply chains snarled by the reawakening of industries across the board, that have jammed major ports and driven prices higher.
Revenue reached $12.4 billion, up from $9.88 billion last year and in the company’s construction industry unit, revenue rose to $5.26 billion, from $4.06 billion in the same period in 2020.
“We experienced supply chain challenges like many other industrial companies," Chairman and CEO Jim Umpleby said in a conference call Thursday. "We believe our sales in the third quarter would have been higher if not for these issues,”
Shares of Caterpillar Inc. climbed almost 3% at the opening bell.
Supply chain backups have become a threat to the nation's economic recovery. On Thursday, the Commerce Department reported that the U.S. economy, slowed to a 2% annual rate in the July-September period, the weakest quarterly growth since the recovery from the pandemic recession began last year.
Those figures captured a period of elevated COVID-19 infections that have begun to wane, yet supply issues continue to hamper major manufacturers like Caterpillar, based in Deerfield, Illinois.
Caterpillar overcame many of the hurdles it faces simply because demand is so strong. Net income doubled to $1.43 billion, or $2.60 per share, for the period ended Sept. 30.
Removing nonrecurring items, earnings were $2.66 per share., easily beating the $2.26 that Wall Street had projected, according to a survey by Zacks Investment Research.
Demand may be elevated further still based on negotiations in Washington related to a dramatically scaled-back domestic policy package, $1.75 trillion of social services and climate change programs the White House believes can pass the 50-50 Senate.
President Joe Biden will make remarks from the White House about the package, and a related $1 trillion bipartisan infrastructure plan, on Thursday.
“We are hopeful Congress passes the Infrastructure Investment and Jobs Act, which could boost customer confidence and help support future demand," Umpleby said.
Caterpillar machinery dealers lowered inventories by $300 million in the third quarter, a considerable improvement from the $600 million cut a year earlier, the company reported.
The construction industry that Caterpillar supplies was hit by the spread of COVID-19 like all others, but the pandemic did drive housing and construction demand as people sought larger or new places to live.
Sales of new homes jumped 14% in September, according to a Commerce Department report on Tuesday. That's the fastest pace in six months as strong demand helped offset rising prices.
Construction sales at Caterpillar jumped 30% to $5.26 billion, outpaced only by mining sales, up 32% to $2.41 billion.