Caterpillar profit tops view, raises forecast

By James B. Kelleher

CHICAGO (BestGrowthStock) – Caterpillar Inc (CAT.N: ) reported a stronger-than-expected quarterly profit and raised its full-year outlook, citing sales growth in emerging markets, especially from customers in mining and energy.

The world’s largest maker of construction and mining equipment said its ability to pass along price increases on its earth-moving machines, engines and turbines more than offset a dip in revenue from its financial services unit.

The company said orders were continuing to outpace shipments to dealers, and it expects to further ramp up production in the second half.

One sign of the company’s confidence: It said it had brought on 3,650 new employees this year — 1,250 in the United States and 2,400 internationally.

But Caterpillar, which laid off nearly 30,000 full-time and contract workers worldwide from late 2008 through 2009, also sounded a cautious note, saying it still has “significant economic concerns,” including the risk of a double-dip recession in Europe and the United States.

“Construction in developed countries is not doing well, particularly in the United States,” said Eli Lustgarten, an analyst at Longbow Research.

Caterpillar posted a second-quarter profit (Read more your timing to make a profit.) of $707 million, or $1.09 a share, up from $371 million, or 60 cents a share, a year earlier.

Sales, plus revenue from financial services, rose 31 percent to $10.41 billion.

Analysts on average expected the Peoria, Illinois-based company to report a profit of 85 cents a share on sales of $9.8 billion, according to Thomson Reuters I/B/E/S.

Global sales of Caterpillar’s yellow bulldozers, excavators and other heavy equipment jumped 55 percent during the quarter, led by a 116 percent rise in Latin America and 62 percent in the Asia-Pacific region.

Sales of gas turbines and reciprocating diesel engines rose 3 percent, led by a 42 percent jump in Latin America and 17 percent increase in the Asia Pacific region.

Financial revenue slipped everywhere except the Asia-Pacific region, where it rose 16 percent.

The better-than-expected results were partially driven by several non-operational items, including a lower-than-expected tax rate, which Lustgarten estimated added 12 cents a share to the company’s bottom line.

Ann Duigan, an analyst at JPMorgan, said the tax benefit might normally be perceived as a negative in terms of earnings quality. But she said the better-than-expected operating leverage Caterpillar reported during the quarter, including operating margins of 7.1 percent in machinery and 15.5 percent in engines and turbine, would “likely overshadow” any concerns about the tax rate.

In premarket trading, Caterpillar shares were up 1.2 percent to $67.69.

Caterpillar said it expects a full-year profit of $3.15 to $3.85 a share on sales of $39 billion to $42 billion. It previously forecast $2.50 to $3.25 a share on sales of $38 billion to $42 billion.

Analysts on average were expecting a full-year profit of $3.29 a share before items, and net income of $3.18 a share, on sales of $38.9 billion, according to Thomson Reuters I/B/E/S.

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(Reporting by James B. Kelleher; Editing by Lisa Von Ahn and John Wallace)

Caterpillar profit tops view, raises forecast