By Bianca Flowers
(Reuters) - Caterpillar Inc (NYSE:CAT) is expected to post a rise in quarterly profit on Thursday, a sign that the industrial powerhouse continues to navigate supply-chain constraints and capitalize on price increases for its construction and mining equipment.
The heavy-machinery giant's strong revenue growth has helped the company buck recessionary fears in the past year. Elevated energy prices contributed to robust demand from its mining customers, while an upsurge in construction sales in North America is being driven by higher capital spending due to the Biden administration's $1 trillion infrastructure law, analysts said.
CAT's chief executive, Jim Umpleby, said during a conference in March that the supply of parts and semiconductors to build machinery is an ongoing challenge. Yet the company's ability to restock dealers' lots faster than expected exemplifies its proficiency, said Kristen Owen, executive director at Oppenheimer & Co Inc.
The manufacturer is forecast to hit double-digit sales growth for earnings and revenue. First-quarter profit is estimated to come in at $3.78 per share, or $1.97 billion of net income, compared with $1.55 billion a year ago. Revenue is projected to climb to $15.26 billion, up 12% from a year ago, according to IBES data.
However, Caterpillar will be tested going forward as turmoil in the banking sector starts to spill into construction lending, which can slow purchases of equipment, said Mircea Dobre, a senior research analyst at Baird.
Credit approvals for equipment financing were down slightly in March from the year prior while U.S. businesses' new borrowings declined 2%, according to a recent report from the Equipment Leasing and Financing Association (ELFA).
"Higher costs and interest rates were already starting to slow down the front end of construction activity - the regional banking developments are just making the problem worse," Dobre said.
Caterpillar's earnings were weighed down last quarter as a result of currency exchange rates, causing the company to miss profit estimates for the first time since 2020.
Nevertheless, margins have remained intact and analysts expect further growth due to the industrial bellwether's $30.4 billion order backlog, said Rene Lipsch, a vice president at Moody's (NYSE:MCO).