What's going on?

Caterpillar, the maker of heavy equipment such as bulldozers and cranes, saw its stock jump more than 7% on Tuesday after it said its sales this year will likely be much higher than it previously thought.

What does this mean?

Caterpillar is exposed to changes in old-school economic activity across the world (think: construction, mining, etc.) like few other companies. The recent global economic pickup appears to have buoyed Caterpillar�s sales, with a particularly strong performance from its mining division (higher commodity prices have driven more mining activity globally).

Why should I care?

For the stock: Caterpillar is benefiting from being leaner and meaner.

Caterpillar has spent much of the past year cutting its fixed costs, including laying off more than 5% of its workforce. At the same time, its sales have increased. Lower costs and higher sales are a potent combination for profits: excluding its restructuring costs (e.g. the upfront costs associated with laying off workers), Caterpillar�s profit almost doubled versus a year ago. While there are certainly risks to its future sales, including a slowdown in global economic growth, investors are clearly pleased by the company�s slimmer new profile.


The bigger picture: Multinational companies tend to benefit from a pickup in global growth.

Caterpillar wasn�t the only winner on Tuesday: Sweden-based Volvo saw its stock jump more than 7% after reporting sales in its truck and mining equipment divisions were much stronger than investors� expectations. And McDonald�s, which makes about two-thirds of its sales outside of America, saw its stock jump 5% after reporting sales growth that was quadruple Wall Street�s expectations. All of these companies are heavily exposed to global economic growth, which is a big reason why we spend so much time writing about it!