Caterpillar Net Rises on Machinery Sales Overseas

January 26, 2007 Filed Under: Mining Equipment, Mining Services  

Caterpillar Inc., the world’s largest maker of earthmoving equipment, said fourth-quarter profit rose 4.3 percent on increased demand for machinery overseas.

Net income climbed to $882 million, or $1.32 a share, from $846 million, or $1.20, a year earlier. Sales gained 14 percent to $11 billion, the Peoria, Illinois-based company said today in a statement.

Demand from the Middle East, Latin America and Asia lifted sales above analysts’ estimates. Machinery revenue rose 13 percent as overseas orders countered a drop in North America. Caterpillar left unchanged its forecast for sales growth this year, and that might give investors some confidence, said Prudential Equity Group Inc.’s Igor Maryasis.

“If they don’t change the outlook, the stock might be up on the news.” said Maryasis, an analyst at Prudential in New York. He has an “overweight” rating on the shares and doesn’t own any. “The guidance they gave in October was incredibly conservative.”

Shares of Caterpillar rose 99 cents, or 1.7 percent, to $60.62 at 9:35 a.m. in New York Stock Exchange composite trading and gained 6.2 percent last year.

Fourth-quarter results missed the $1.35 average estimate of 13 analysts surveyed by Bloomberg. The average sales estimate was $10.4 billion.

2007 Forecast

Revenue for 2007 will be $41.5 billion to $43.6 billion, the company said. Sales last year rose 14 percent to $41.5 million. Analysts, on average, estimate 2007 sales will be $41 billion.

Profit will rise to $5.20 to $5.70 a share next year from $5.17 in 2006, Caterpillar said. On-highway truck engine and U.S. housing demand will drop sharply this year and dealer inventories will shrink, the company said. It plans to focus on managing costs to increase profit.

Thirteen analysts surveyed by Bloomberg estimate 2007 profit will be $5.53 a share.

Operating costs climbed $322 million in the quarter. About $153 million of that came from increased manufacturing expenses, including higher costs for raw materials, the company said. Research and development and general costs rose $169 million.

Machinery Sales

Machinery sales in North America declined 1 percent. Revenue in Europe, Africa and the Middle East increased 42 percent. Latin America jumped 39 percent and Asian revenue increased 9 percent.

Caterpillar is a bellwether of the U.S. economy because its sales span industries from mining to oil to construction, making orders dependent on both consumers and corporate spending.

Caterpillar, which gets more than half its sales in the U.S., benefited last year as companies bought trucks in advance to avoid 2007 emissions changes that make vehicles more costly.

Over the past two years, plants ran at full capacity to meet demand, particularly for mining equipment, as countries such as India and China bought more machines.

Caterpillar’s 2006 profit rose 24 percent to $3.54 billion.

The company has forecast sales of more than $50 billion in 2010 and per-share profit will rise 15 percent to 20 percent through that year. Earnings may be $8.13 to $10.05 a share in 2010, Owens said at the company’s investor meeting on Nov. 3.

Source: www.bloomberg.com