Caterpillar's Optimism for 2018 Reflects Rebound in Global Economy

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Researched by Industrial Info Resources (Sugar Land, Texas)--The U.S. economy has been growing noticeably in the past year, but quarterly and full-year results from Caterpillar Incorporated (NYSE:CAT) (Peoria, Illinois) indicate the global economy is recovering as well. The heavy-machinery manufacturer serves a multitude of industries, but it was demand for mining and retail-machine equipment that drove much of its stellar performance in 2017, particularly in the Asia-Pacific region.

Caterpillar executives expect the growth to continue throughout 2018. In particular, Caterpillar capital spending in its Resource Industry business, which covers the mining industry, to increase as miners worldwide invest in equipment-replacement cycles and boost aftermarket parts opportunities through higher machine utilization. Industrial Info is tracking $1.24 trillion in active mining projects worldwide, including more than $450 billion worth that are under construction or expect to begin construction this year.

One of the largest global mining projects under construction is Vale S.A.'s (NYSE:VALE) (Rio de Janeiro, Brazil) $7.9 billion railway and terminal expansion for the Serra Sul iron ore mine near Parauapebas City, Brazil, which began in mid-2013 and is set to conclude late this year. Construction on the mine itself, which is expected to produce 75 million tons per year at its peak, was completed early last year, and the fully completed, $19 billion complex is expected to push Vale past its top rival, Rio Tinto plc (NYSE:RIO) (London, England), in annual output. For more information, see Industrial Info's project report.

Projected growth in Caterpillar's Construction Industries is a little more modest, largely due to the anticipated seasonality of sales in China. But the North American business is expected to get a boost from higher demand for residential, non-residential and infrastructure services, regardless of whether an infrastructure bill passes Congress, while most international businesses are expected to continue gains made last year. Industrial Info is tracking more than $252 billion in active project worldwide in sectors such as heavy manufacturing, housing, warehousing, building products, furniture, distribution and transportation including nearly $200 billion worth that are under construction or expect to begin construction this year.

Two such projects can be found on the U.S. East Coast: Microsoft Corporation's (NASDAQ:MSFT) (Redmond, Washington) $402.4 million data center in Boydton, Virginia, and United Parcel Service Incorporated's (NYSE:UPS) (Atlanta, Georgia) $400 million package-sorting hub in Atlanta, Georgia. Microsoft's facility is expected to provide more than 310,000 square feet for colocation and cloud-computing services, while the UPS facility will be equipped to handle more than 100,000 packages per hour. Both are expected to be completed later this year. For more information, see Industrial Info's reports on the Microsoft and UPS facilities.

Caterpillar's Energy & Transportation business is expected to benefit from demand in the North American Oil & Gas Industry for gas-compression and well-servicing engines. The pipeline business is enjoying a strong order backlog for turbines, while recent acquisitions in rail services are expected to benefit the transportation business. Power-generation equipment sales also are expected to see a modest boost. Industrial Info is tracking $9.5 trillion in active energy- and transportation-related projects worldwide, including $3.43 trillion worth that are under construction or expect to begin construction this year.

Not surprisingly, demand for natural gas-fired facilities is driving much of the global growth in power generation. Among the projects expected to wrap up toward the end of the year is Duke Energy Corporation's (NYSE:DUK) (Charlotte, North Carolina) $1.5 billion Citrus County Power Station in Crystal River, Florida. The natural gas-fired, combined-cycle (NGCC) power station will consist of four 270-megawatt (MW) Mitsubishi combustion turbines, with inlet air chilling and supplemental-fired heat-recovery steam generators (HRSG), and two 280-MW steam turbines, for a total output of 1,640 MW. For more information, see Industrial Info's project report.

Among the transportation projects in Hennepin County Regional Railroad Authority's $1.79 billion 'Green Line' light-rail expansion in and around Minneapolis, Minnesota, the state's largest-ever transit project. The 15.8 miles of double track will include 17 stations, stretching from downtown Minneapolis to Eden Prairie, in Hennepin County. For more information, see Industrial Info's project report.

At the end of 2017, Caterpillar's order backlog stood at about $15.8 billion, compared with about $3.7 billion at the end of 2016. Regionally, overall sales increased 38% in the European, African, and Middle Eastern areas due to favorable prices and higher end-user demand for equipment, and 39% in Latin America due to stabilizing economic conditions. Sales and revenues for the full year totaled $45.5 billion compared with $38.5 billion in 2016; Caterpillar raised its revenue outlook three times throughout 2017.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.