Caterpillar profit tops forecast with foreign sales

Caterpillar Inc., the world’s largest maker of construction equipment, posted fourthquarter profit that topped analysts’ estimates as sales advanced in China, Australia and Latin America.

Net income rose fourfold to $968 million, or $1.47 a share, from $232 million, or36 cents, a year earlier, the Peoria, Ill.-based company said Thursday. The average estimate of 19 analysts in a Bloomberg survey was $1.28 a share.

Chief Executive Officer Doug Oberhelman is betting on higher mining-equipment sales with Caterpillar’s $7.6 billion acquisition of Bucyrus International Inc. as Asiandemand drives up commodity prices. Oberhelman said in August that he’s working more closely with suppliers to increase profits and recognizes that investors are concerned the company’s earnings from 2006 through 2008 increased at a slower pace than sales.

“The top line just blew away our expectations forthe quarter, but the longerterm questions around the company improving its core operating performance remain,” Joel Levington, managing director of corporate credit at Brookfield Investment Management Inc. in New York, said in an e-mail. “For today, though, you have to give Caterpillar credit fora very strong quarterly performance.”

Caterpillar shares rose 88 cents Thursday to close at $96.63.

The company said 2011 earnings will be “near” $6 a share. That compares with the $5.87 average prediction of 24 analysts surveyed by Bloomberg. Caterpillar’s full-year outlook includes U.S. locomotive manufacturer Electro-Motive Diesel, which it agreed to buy last year, and excludes the pending purchases of Bucyrus and engine producer MWM Holding GmbH.

Sales climbed 62 percent to $12.8 billion from $7.9 billion in the quarter. Machinery sales rose 88 percent to $8.57 billion and the engine unit’s revenue gained 36 percent to $3.57 billion. The company said 2011 sales will exceed $50 billion, compared with $42.59 billion in 2010.

Caterpillar sees continued growth in developing countries, improving North American and European economies, increasing mining-product demand, and more sales to dealers who are adding to inventories and replenishing rental fleets.

The company forecast 2011 capital expenditures of about $3 billion, with more than halfof that in the U.S. It said in 2010 that it plans to build three domestic plants and five in other countries.

“This will be an execution year,” Larry De Maria, an analyst in New York for brokerage Sterne Agee & Leach, said in an interview before the earnings report was released. “Investors’ eyes will be looking at operational performance to ensure there is strong profitpull-through.”

Caterpillar also said the world economy should grow by more than 3.5 percent this year, a rate similar to 2010, as most governments and central banks expect job creation rather than fighting inflation to be their “dominant” economic problem. The U.S. will grow about 3.5 percent in 2011, it forecast.

Economic growth in developing economies will “moderate” to about 6.5 percent in 2011 from 7 percent in 2010, Caterpillar forecast. Asia-Pacific growth will slow to 7.5 percent this year from 8.5 percent in 2010 amid China’s economic tightening policies.

Caterpillar said last year that it expects that 600 people eventually will work at its North Little Rock plant, which began production in June.

Business, Pages 19 on 01/28/2011

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