Caterpillar Flags Signs of Recovery Amid Slack Demand

By Austen Hufford 

A construction slowdown during the coronavirus pandemic is hurting demand for Caterpillar Inc.'s heavy machinery, but the manufacturer said dealers and customers expect a turnaround this year.

The Deerfield, Ill., company said Friday that revenue fell 15% in its fourth quarter due to lower volumes and less demand from customers and dealers. Revenue declined in each of Caterpillar's main businesses: construction, mining, and energy and transportation.

Andrew Bonfield, Caterpillar's financial chief, said in an interview that while a rebound in home construction was boosting purchases for some machinery, spending cuts by local and state governments was weighing on road construction.

"People in an uncertain time are just not necessarily sanctioning new projects," Mr. Bonfield said.

Still, Caterpillar said it sees signs of a turnaround. Its order backlog increased in its fourth quarter compared with the previous three months and a year earlier as dealers ordered new machines ahead of the traditionally busy spring season. For the current first quarter Caterpillar said it expects stronger sales of construction equipment in particular.

"Customers are starting to feel a bit more confident," Mr. Bonfield said.

Shares rose 0.8% to $185.86 in premarket trading.

Lower demand for Caterpillar machinery in the latest quarter is a contrast to consumer-focused manufacturers, who have struggled to keep up with large orders from customers at home buying new boats and kitchen appliances.

Caterpillar said its service and parts revenue fell to $16 billion in 2020, down from $18 billion in 2019, showing how the pandemic is making it more difficult for companies to stick by preset strategies. The company has been trying to generate more recurring revenue from services tied to digitally enabled equipment.

In all, revenue in the quarter fell 15% to $11.26 billion from the quarter a year before. Profit declined 29% to $780 million.

(END) Dow Jones Newswires

January 29, 2021 08:17 ET (13:17 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.