Caterpillar profit surges as demand recovers

A worker driving a Caterpillar tractor near a construction site in Gilbert, Arizona, October 20, 2009.

Credit: Reuters/Joshua LottBy Scott Malone

BOSTON | Fri 29 april 2011 2: 47 pm EDT

BOSTON (Reuters)-Caterpillar Inc. included a five-fold increase in profits and increased the 2011 profit forecast as customers new heavy equipment bought to replace old machines that age during the economic downturn.

World's largest maker of earth-moving gear said Friday that the strong demand for devices that are used in mining revenue rise, helped while the demand for construction equipment has been slower to recover--a trend that the said leave enough room to grow sales and profits in the coming years.

It raised its full year profit forecast to a range of $ 6.25 to $ 6.75, a sequence that at her high point is 24 cents above forecast of Wall Street and the proposed growth rate of around 57 percent of last year.

"If you really look at what happens in the United States, it is a very slow recovery of very low numbers," said Chief Executive Doug Oberhelman on a conference call with analysts. "When construction activity rebounds in the developed world, call it the United States and Western Europe, we are going to be ready."

Still, given the fact that the company expectations of analysts first quarter earnings by 53 cents per share beat, the full-year forecast suggests that the company will not continue the torrid pace through the rest of the year, said Edward Jones analyst Jeff Windau.

"They have a strong recovery but the comparables are now getting a bit more difficult," said Windau. "I would expect that the growth goes through the rest of 2011 moderating."

RISING ROLE FOR RAW MATERIALS

The report comes a day after government figures showed that economic growth in the United States in the first quarter, with higher food and gasoline prices beginning to weigh on consumer spending and sparks of concern about inflation greatly delayed.

Commodity inflation isn't necessarily bad news for companies including Caterpillar and General Electric Co that equipment used in the production of energy and raw materials extraction. Rising demand for and prices of metals, coal and oil are spurring demand for Caterpillar heavy equipment--her sale to miners and other resource companies almost doubled in the quarter, surpassing the construction company equipment.

"The strong commodity markets for us is a net positive based on the question them for our mining business driving," Chief Financial Officer Ed Rapp clearing margin under pressure from the higher cost of raw materials, said in an interview.

Caterpillar exposure to raw materials, including metals and coal will only increase when it is closed on the $ 7.6 billion takeover of mining equipment maker Bucyrus International through the middle of this year.

The results better than expected given the company closer to its goal of being able to close that deal without additional own funds, said Rapp. When the acquisition was first announced, said Caterpillar that it might be to issue $ 2 billion of stock to cover the purchase.

PROFIT TOPS STREET VIEW

Caterpillar first-quarter profit of $ 1.23 billion, or $ 1.84 per share, compared to 233 million dollars, or 36 cents per share, a year earlier reported. Analysts expected profit of $ 1.31 per share, according to Thomson Reuters I/B/E/S.

Turnover increased 57.2 percent to $ 12.95 billion, above expectations of 11.69 billion dollars.

"It's a huge number on huge volume, which is the simplest way to describe it," said Eli Lustgarten Longbow Research analyst. He said revenue came in more than 1 billion dollars above forecasts.

Caterpillar joins a series of strong earnings reports from industrials ranging from 3 M Co Komatsu Ltd.

The shares rose by 2.6% to $ 115.58 on the New York Stock Exchange; They hit earlier a lifetime high of $ 116.25. As of Thursday close, she was 63 percent in the past year, more than four times the pace of the rise in the Dow Jones industrial average, whose Caterpillar is a component.

Caterpillar said the aftermath of the earthquake in March Japan would lower its full-year results, pulling income by approximately 300 million dollars and operating profit by 100 million dollars.

(Reporting by Scott Malone; editing by Robert MacMillan, John Wallace and Dave Zimmerman)

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