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Caterpillar Tops Q4 Earnings Forecast as Asia/LatAm Sales Offset North American Slide

Caterpillar uses improving profit margins, as well as a boost in Asia sales, to drive stronger-than-expected fourth-quarter earnings.

Caterpillar Inc.  (CAT) - Get Caterpillar Inc. Report posted stronger-than-expected fourth-quarter earnings Friday, with improved profit margins, lifting its shares higher in pre-market trading

Caterpillar said adjusted profits for the three months ending in December were pegged at $2.12 per share, down 20% from the same period last year and well ahead of the Street consensus forecast of $1.49 per share. Group revenues, Caterpillar said, fell 14.5% to $11.24 billion, a figure that was largely in-line with analysts' estimates.

Operating profit margin was 11.8% for the third quarter of 2020, rising from 10% in the previous three month period, and 10.9% for the full year, Caterpillar said, and noted it ended the quarter with $9.4 billion in cash.

"I'm proud of our global team's continued resilience in safely navigating COVID-19 while continuing to provide the essential products and services the world needs," said CEO Jim Umpleby. "Our fourth-quarter and full-year results reflect the team's agility in a challenging environment while executing our strategy for long-term profitable growth. We achieved the adjusted operating profit margin established during our 2019 Investor Day while continuing to invest in products and services. We are well-positioned for the future and will emerge from the pandemic as an even stronger company."  

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Caterpillar shares were marked 0.2% higher in early trading following the earnings release to change hands at $185.00, compared to a 1.2% slide for the Dow Jones Industrial Average, in move that would extend the stock's six-month gain to around 32%.

"Taxes added $0.31 versus our model (but) otherwise, the beat was fueled by strength in both construction and resource Industries," said BMO Capital Markets analyst Joel Tiss. "Looking ahead, operating margins are projected to improve sequentially in 1Q21, while sales should be stronger year over year, especially for construction industries."