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Caterpillar Inc. (CAT-N) on Friday painted a better picture for 2021 after posting a smaller-than-expected fall in quarterly earnings, citing improvements in equipment demand following the coronavirus-triggered downturn last year.

The Illinois-based manufacturer of heavy machinery, a bellwether for economic activity, was hurt last year as business uncertainty prompted customers to delay capital spending, hitting sales of bulldozers, mining trucks and other equipment.

The company, which had pulled its guidance early in the pandemic, did not provide an earnings forecast for this year because of lingering economic uncertainty.

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“Market conditions remain fluid due to the pandemic,” Chief Executive Jim Umpleby said on an earnings call.

Still, he expects sales to be “stronger” this year due to a build-up in dealer inventory as well as improvements in the company’s end-markets.

Caterpillar’s optimism stems from increased residential activity in North America and a strong demand for construction machines in China.

U.S. homebuilding and permits have surged, underpinned by cheaper mortgages and an exodus from city centers to suburbs and other low-density areas. Similarly, Beijing’s infrastructure investment drive has lifted sales of construction machines in China, which accounts for up to 10% of Caterpillar’s sales.

Higher commodity prices are encouraging miners to invest in new machinery.

Caterpillar’s equipment sales fell across its three primary segments in the latest quarter, though the decline in retail sales slimmed to 2% in December from 17% in October.

Caterpillar’s shares were up 2% at $188.4 in morning trade. They have gained over 22% since late October.

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Umpleby said the company intends to revisit current pause in share repurchases later this year. Share repurchases were suspended last year following the pandemic-induced business turmoil.

The company also plans to recommend an increase in dividend payout this year, Umpleby said.

Adjusted profit came in at $2.12 per share, a 22% drop from a year earlier. Analysts surveyed by Refinitiv on average expected earnings to decline 45%.

The quarterly earnings were helped by lower costs and a lower tax rate.

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