Caterpillar beats Wall Street estimates
For the 11th time in the past 12 quarter Caterpillar Inc., the world’s largest manufacturer of construction and mining equipment posted profits that beat analysts; estimates. The company also said it believes projections set by Wall Street for this year were too conservative. This new lifted the stock market with expectations the world economy is coming out of recession.
Bloomberg Business Week reported shares of Caterpillar jumped as much as 4.5 percent on Jan. 26, in the Dow Jones Industrial Average, after the company said net income climbed 60 percent in the quarter. Caterpillar said the global economy will grow 3.3 percent in 2012, up from 2.8 percent last year.
Chief Executive Officer Doug Oberhelman has spent about $11 billion to strengthen the companies position in mining. Included in the spending was the acquisition of companies including Bucyrus International Inc. to exploit a boom in the mining industry after prices advanced for commodities including gold, copper and coal.
Fourth-quarter net income rose to $1.55 billion, or $2.32 a share, from $968 million, or $1.47, a year earlier, the company said in a statement. The average of 21 analysts’ estimates compiled by Bloomberg was $1.73 a share. The top forecast was $1.87.
Profit in 2012 will be about $9.25 a share, Caterpillar said. That’s above the average estimate of $9.10 and within the $8 to $10 range Oberhelman set as a target for 2012 when he became CEO two years ago. Sales in 2012 are forecast at $68 billion to $72 billion. Revenue was $60.1 billion in 2011.
Prospects for the world economy in the year ahead have improved over the past quarter, with the start of a recovery in U.S. construction spending, Caterpillar said.
U.S. earthmoving-machinery volumes will increase as much as 12 percent in 2012, Robert McCarthy, a Chicago-based analyst for Robert W. Baird & Co., said in a report on Jan. 19.
The U.S., which made up 32 percent of Caterpillar’s 2010 revenue, will grow by at least 3 percent this year, the company forecast.
Capital spending at “major” mining companies is expected to climb 25 percent this year, according to data compiled by Bloomberg Industries.
Caterpillar said it had a record $29.8 billion backlog of orders at the year-end and that its capacity will constrain sales in 2012.
The company acquired Bucyrus in July for $8.8 billion including debt, adding shovels and drills to its product range. Caterpillar also agreed in November to buy Hong Kong-based ERA Mining Machinery Ltd. for as much as HK$6.89 billion ($890 million).
Caterpillar will concentrate on “continuing to improve quality, our investment in product development, integrating our acquisitions and adding production capacity,” Oberhelman said in the statement.
“We’re very tight on production capacity for many of our products and are continuing to invest in new and existing factories,” he said. “Our investments in capital expenditures and R&D will certainly add cost in 2012, but it’s the right thing to do.”