Caterpillar Earnings Double on Strong Overseas Sales
Caterpillar’s second-quarter earnings shot up 91 percent with the heavy machinery manufacturer reporting robust sales of equipment for industries that range from mining and infrastructure to energy.
The company boosted its 2010 profit outlook as well on Thursday, saying it is trying to keep up with new orders and will ramp up production of its signature black-and-yellow equipment in the second half of the year.
The results and Caterpillar’s own forecast reflect an uneven recovery and some anxiety about what kind of rebound to expect. Emerging markets like China and Brazil, not U.S. or Europe, still lead the way.
Asian sales grew by 62 percent to $1.7 billion. Caterpillar said overall sales of machinery were helped by low interest rates and higher metal prices that spurred mining activity, and a brighter global economic picture.
The North American market, Caterpillar’s biggest, saw sales rise 43 percent. The company said the growth was driven by an improvement in home construction, a modest increase in federal spending for highways, and better prices in sectors like metals, coal and lumber.
While sales are up, Caterpillar has not brought back most of the 19,000 full-time and 18,000 contract and part time workers it was forced to shed during the recession. Caterpillar added about 3,650 new workers by the end of the second quarter to push its total employment to about 97,500. A third of those jobs were outside the United States.
Caterpillar CEO Doug Oberhelman noted “significant economic concerns” that remain globally, but he remained optimistic.
“We continue to be positive about the longer-term prospects for many of the industries we serve,” he said.
Caterpillar is a bellwether of industrial activity and broader industrial growth. Almost every sector needs the products that Caterpillar sells in order to grow, whether it’s a utility installing new power lines or a developer building new homes. When the economy is expanding, Caterpillar sells more of its backhoes, mining equipment and engines.
When the recession set in, Caterpillar was among the first to feel it.
The company’s quarter and its forecast reflect a global recovery and economies still smarting from the economic downturn.
For instance, dealer inventories remained flat, which is good compared with last year during the same period when inventories were trimmed by nearly $1.9 billion. On the other hand, dealers have yet to begin restocking, which is usually what happens when an economic recovery is gaining momentum.
Still, Caterpillar has posted two strong quarters this year after seeing profits tumble drastically in 2009 and the company’s outlook cheered investors Thursday.
Caterpillar reported second-quarter net income of $707 million, or $1.09 per share. That is from $371 million, or 60 cents per share of profit a year ago.
Sales rose 31 percent to $10.4 billion, with Caterpillar reporting gains in machinery sales in all four global regions it serves. Manufacturing costs fell by $316 million, helping to fatten profits.
That easily topped Wall Street expectations of 85 cents per share of earnings on revenue of $9.8 billion.
For all of 2010, Caterpillar expects to earn between $3.15 to $3.85 per share, up from a previous forecast of $2.50 to $3.25 per share. It also tightened its revenue forecast, bumping up the lower range by $100 million. Caterpillar now expects between $39 billion to $42 billion in revenue.
Shares in Caterpillar Inc. rose $1.58, or 2.3 percent, to $68.45 in early afternoon trading.
STEPHEN MANNING, AP Business Writer