A Barron's piece on Caterpillar (NYSE: CAT) suggests a rebound in China and a Trump presidency has helped CAT improve its earnings outlook and share performance, following a series of managerial missteps and the rapid deterioration of commodity prices in recent years, which left the company searching for answers. First quarter EPS print above consensus estimates and revenue of a half a billion dollar above projections, highlight the company's rebound from recent challenges.

While most manufacturers were hurt by the financial crisis, CAT saw additional pain following a big bet in the commodities space, as management acquired Bucyrus International for $8.6 billion including debt in 2011. The deal amounted to a strategic commodity/global infrastructure play at the top of the commodities market with crude oil above $100 per barrel at the time. Soon after the deal was completed in 2012, emerging market economies slowed, commodity prices dropped and orders for machinery supporting the space dried up globally. Over the next four years, Caterpillar saw its revenues fall from $63.1 billion to $35.8 billion.

Since that revenue trough in 2016, the company's prospects started to rebound incrementally into 2017 when China's economic recovery provided the floor for commodity prices worldwide. The election of Trump resulted in an acceleration of CAT's recovery, as his pro-business policies, more specifically tax reform, potential investments in infrastructure and favorable repatriation policies, have spurred confidence and thus, demand among Caterpillars customer base.

These factors served to fuel CAT's turnaround and quarterly earnings and share outperformance according to Barron's, "overall revenues rose 4% from a year earlier. Wall Street had predicted a 2% decline. Caterpillar reported a smidgen of growth in its construction, energy, and transportation businesses but a 15% jump in its resources division. Don’t get too excited, say bears; it was mostly parts. But those parts are made necessary by machines being put to harder work, which eventually tends to lead to a pickup in new equipment orders. Oil is up more than 80% from last year’s low; coal, too. U.S. construction spending recently approached an 11-year high. Caterpillar’s earnings leverage was on full display last quarter. Earnings per share were expected to decline slightly, excluding restructuring costs. Instead, they doubled, to $1.28. Management raised its earnings guidance for this year, to $3.75 a share at the midpoint, from $2.90. The guidance looks conservative compared with first-quarter results."