Boston, MA 01/29/2014 (wallstreetpr) – Caterpillar Inc (NYSE:CAT) depends on the construction and mining industry. It recently posted an unexpected profit, meaning that it performed much better than analysts had predicted. This impressive performance has been attributed to the fact that the company’s cost-cutting efforts are now bearing fruit. Secondly, it seems that there is a strong correlation between the economy, especially in the aforementioned sectors, and the performance of a company such as CAT since it relies a lot on clients purchasing its building equipment, which is the best globally.
Last year, Caterpillar Inc (NYSE:CAT) opted to reduce its workforce by close to 10,000 jobs. At that time, when it decided to take this course of action, there were many complaints across the board. The main reason that CAT investors should now look forward to some great times, is that it seems the global economy is on a positive trend. The last five to six years have not been good for the global economy, which at one time almost came to a standstill. CAT now hopes that as more nations around the world report positive economic growth, the construction industry will pick up.
When the construction industry picks up, obviously, more buildings will be put up, hence creating a demand for building and construction equipment, which CAT provides. When this happens, investors can look forward to better performances than the $1 billion profit that CAT recently reported for its fourth quarter of 2013 returns. As the tide turns gradually, the company is optimistic that it will post better revenue than the $14.4 billion it posted, and which was 10 percent lower than the figure it announced during the same period a year ago.
CAT has fared more or less in the same way as its peers in the industry, Deere and Joy Global. However, it has fared slightly worse than the two due to its focus on construction and mining equipment. The way the two sectors are going right now, it will not be too long before they start experiencing positive changes, which will be good for the companies that depend on them such as CAT. There was a time when Caterpillar’s sales in the Asian-Pacific region were doing very well, but this changed when the construction industry took a hit.
Caterpillar Inc (NYSE:CAT) also needs to think of ways it can work better and offer the best equipment and services compared to its competitors such as General Electric, which seeks to offer solutions to mining companies. The company’s stock has suffered as a result of what it has faced in the past two to three years, to a point where it has fallen by around 2%. It appears that most analysts believe that CAT will not fare much better in 2014, and have already started lowering their expectations despite the fact that the company’s management believe things are about to change for the better.
When the construction industry recovers, and the mining industry follows suit, the huge competitive advantage that CAT has over its rivals will be of great help. The company will benefit more than others once the seemingly hard times in construction and mining industry improve.
