Construction Company Earnings Summary 2Q 2021

Key Takeaways

• Most companies report strong demand and a positive outlook for the rest of 2021. The US infrastructure bill is expected to support growth for years.
• Rising input costs, such as steel and copper, are increasing manufacturing expenses.
• Supply chain issues persist, but major manufacturers like Caterpillar say they're manageable.
• Several firms note that equipment rental company demand is on the rise.

Global construction demand remains robust, fueled by the post-pandemic recovery. Most manufacturers believe the industry is set for several more years of growth, supported by government spending and infrastructure projects.

Higher input costs remain a concern, with many manufacturers reporting supply challenges. Caterpillar noted that while there are supply issues, they haven't affected inventory levels significantly.

Caterpillar dealer inventories are currently at the lower end of historical trends, indicating a tight market.

Company Outlooks

Titan Machinery

Titan Machinery reported a 35% increase in equipment revenue during the second fiscal quarter, driven by strong demand and improved inventory management. CEO David Meyer highlighted the company's improved performance across its construction and international segments, along with steady growth in parts and service sales.

COO Bryan Knutson emphasized the company’s operating improvements, which have led to better profitability. He also noted that the current environment—supported by low interest rates, new housing starts, and pending infrastructure legislation—is helping to drive demand.

Titan is confident in its ability to meet revenue targets despite ongoing supply chain constraints and is raising its expectations for the remainder of the year.

John Deere

John Deere reported strong results across all product categories, thanks to the efforts of its employees and dealers. CEO John C. May noted that supply chain pressures continue to challenge the industry, but demand for farm and construction equipment remains strong.

The company forecasts a 15–20% increase in North American construction equipment sales, with compact equipment up 20–25%. Forestry equipment is also expected to grow due to strong lumber demand.

Deere is seeing increased activity in both residential and non-residential construction, with rental companies showing strong order activity. The company expects to maintain high inventory turnover and sees long-term growth potential in the sector.

Linamar (Skyjack)

Linamar CEO Linda Hasenfratz said the company is benefiting from strong market demand, even though supply chain shortages pose challenges. She added that Linamar is managing these issues while growing market share and generating cash.

Skyjack saw a strong quarter, with commercial and industrial sales up 48% due to strong performance. Equipment utilization levels remained high, and double-digit growth is expected in core North American and European markets in 2021 and 2022.

A strong backlog supports Skyjack’s growth outlook, with expectations of double-digit sales increases for the next two years.

Manitowoc

Manitowoc CEO Aaron Ravenscroft said demand for its products exceeded expectations, driven by a recovering market. However, he warned that rising inflation, supply chain issues, and labor shortages could create challenges in the second half of 2021.

Europe and Asia continue to show strong demand, although the European mobile crane market is still lagging. The Americas are performing well, and any infrastructure bill passed by the U.S. government could provide further tailwinds.

Manitex

Manitex CEO Steve Filipov highlighted higher revenues, improving gross margins, and strong EBITDA growth. He noted that the company is gaining market share in certain European markets and is positioned for a recovery in straight mast boom truck sales.

He also mentioned increased confidence from distributors and partners, with legislative progress on infrastructure funding suggesting stronger construction activity. While supply chain challenges persist, Manitex expects a strong finish to the year.

Caterpillar

Caterpillar CEO Jim Umpleby noted that sales and revenues rose across all regions and segments, reflecting continued improvement in end markets. Demand in construction and mining was particularly strong, with orders picking up in the first half of the year.

Dealer inventory levels remain low, and availability of most products is within normal ranges. Despite supply chain challenges, Caterpillar has implemented contingency plans to minimize disruptions and ensure continued production.

CNH Industrial (Case)

CEO Scott Wine stated that CNH Industrial delivered record earnings despite supply chain and inflationary pressures. He highlighted the cyclical upturn in the industry and the strong performance of its AG, CE, and C&SV segments.

Construction equipment demand is growing in both light and heavy segments, with residential construction and preparations for the U.S. infrastructure bill driving growth. South American demand is particularly strong, with global construction growth up double digits.

Hitachi

Hitachi reported solid order intakes, mainly in markets recovering from the pandemic. The company continues to see strong demand in key regions.

Komatsu

Komatsu expects steady demand in residential and non-residential construction, as well as road and traffic infrastructure. Rental equipment demand is beginning to recover.

European construction demand is rebounding, especially in the UK, Germany, and France. Global mining demand is very strong, with significant growth in Oceania, Latin America, and Asia.

Terex

Terex reported strong performance in AWP and MP segments, with positive indicators for non-residential investment and continued strong order activity. The access equipment market is entering a multi-year replacement cycle as fleets age.

Utility demand is strong across tree care, rental, and investor-owned utilities. Materials processing demand is also growing, driven by economic expansion and construction activity.

Global monetary and fiscal stimulus programs are supporting demand in Terex’s end markets. The company sees robust conditions worldwide for its products and solutions.

Oshkosh (JLG)

Oshkosh CEO John Pfeifer noted that supply chain disruption and labor shortages are challenging industries globally, but the company has managed to deliver strong results. Demand is increasing rapidly, causing stress on global supply chains.

JLG is seeing strong demand in North America, with elevated fleet ages and strong equipment utilization fueling growth. The company expects a multi-year opportunity for replacement demand as rental companies look to modernize their fleets.

Orders were strong during the quarter, leading to a record backlog of $1.75 billion. Electric equipment is gaining traction, with customers looking for improved performance and reduced environmental impact.

Volvo Construction Equipment

Volvo reported good demand for its products and services, despite semiconductor and material shortages that caused production stoppages. The company achieved an adjusted operating margin of 10.7% in Q2 2021.

Outside China, price increases are being introduced to offset raw material cost inflation.

Atlas Copco

Atlas Copco expects customer business activity to remain high. Order intake increased 45%, representing organic growth of 54%.

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