Caterpillar sales rise and company positive about 2011

 

CHICAGO (Dow Jones)--Caterpillar Inc.'s (CAT) third-quarter profit surged 96%, as construction and mining companies replenished their machinery fleets following a reduction in purchases last year.

Caterpillar, the world's largest manufacturer of bulldozers, excavators, wheel-loaders and other construction machinery, said Thursday machinery sales rose sharply even in North America and Europe where construction activity remains weak.

"Sales in developed countries have improved substantially after deep declines in 2009," Chief Executive Doug Oberhelman said.

Machinery sales rose 84% in the third quarter from a year ago to $7.2 billion. Sales in North America increased 89% from a year ago, while sales in Europe, Africa and the Middle East rose 60%.

The Peoria, Ill., company attributed the pickup to the replacement of worn-out machinery, noting that North American equipment sales had been declining since mid-2006. Last year's economic recession added momentum to the pullback in purchases. Machinery sales in 2009 fell 43% from 2008; sales in North America sank 45%. Mining companies in North America also have increased their purchases in response to improved prices for mined commodities and increasing demand from overseas customers.

Meanwhile, demand from developing economies, such as China, showed no signs of weakening. Machinery sales in Latin America climbed 121% and sales in Asia rose 81%. The company has been overhauling its production sites this year to boost its manufacturing capacity in China, Brazil and other markets where accelerated infrastructure construction and mine expansions are creating robust demand for machinery.

Caterpillar's engine sales increased 21% in the third quarter while revenue from its financial-services unit fell 5%.

The company said its world-wide work force reached 13,336 employees, which included about 2,300 workers for Electro-Motive Diesel, a locomotive manufacturer Caterpillar acquired in August. Since the beginning of the year, the company said it has added about 6,200 full-time employees and has added about 9,000 temporary and part-time workers.

The company sees gross domestic product growing about 2.5% next year in developed economies like the U.S. and Western Europe and estimates GDP growth of about 6.5% in developing economies. Overall, the company forecasts global GDP growth to exceed 3.5% next year.

Caterpillar now expects 2010 earnings of $3.80 to $4 a share, up from its prior view of $3.15 to $3.85 a share. It sees revenue in a range of $41 billion to $42 billion, compared with $39 billion to $42 billion previously. Wall Street analysts estimated the company will earn $3.71 a share on $39.9 billion in revenue. The company said its revenue in 2011 will likely approach $50 billion.

Some analysts warn the company will have difficulty matching this year's surge in sales and profit in 2011.

"This year was almost a slam-dunk for them," said Adam Fleck, an analyst with equity research firm Morningstar Inc. "They've had the nice benefit of (Caterpillar) dealers not cutting their inventories. They're probably not going to have that benefit next year, and they'll have a somewhat slowing economy."

For the quarter ended Sept. 30, Caterpillar reported a profit of $792 million, or $1.22 a share, up from $404 million, or 64 cents a share, a year earlier. Revenue surged 53% to $11.13 billion, rebounding from a 44% decline a year ago.

Analysts polled by Thomson Reuters expected a profit of $1.09 a share on revenue of $10.65 billion.