Caterpillar's Profit Rises 16% On Orders for U.S. Machines
March 29, 2011
Caterpillar Inc., citing better than expected demand for its construction equipment in the U.S., said its second-quarter net income rose 16% on flat sales. Also, the company, revising its previously glum outlook, said it now anticipates a stronger U.S. economy for the rest of the year. The Peoria, Ill., maker of construction equipment and diesel engines, said it earned $374 million, or $1.94 a share, in the recent quarter, up from $323 million, or $1.62 a share, in the year-earlier period. Revenue fell slightly to $4.18 billion from $4.21 billion a year earlier. The results, the highest quarterly profit in Caterpillar's history, surprised Wall Street investors. Most analysts had expected the manufacturing giant to post per-share earnings of about $1.64. Caterpillar's stock jumped 3.5% in the first few hours of New York Stock Exchange Composite trading, ultimately rising $2.625 to close at $66.375. In April, Kavanagh called for a slowdown in U.S. economic activity and even warned of a possible ``mild recession'' in the second half of the year. At the time, its dealers were reducing inventory and ordering fewer machines. The recent quarter, however, brought an increase in dealer orders for machines over the year-earlier period, suggesting that factory shipments may improve for the rest of the year. ``As the year has unfolded, we feel the Fed has been successful with the soft-landing,'' said Doyle R. Mckinley, chief financial officer. In its revised outlook, Caterpillar said U.S. demand for its machines should be slightly below 2010 levels, an improvement over its earlier forecast. In the recent quarter, U.S. sales (which account for half of world-wide sales) were $2.20 billion, down 1% from the year-earlier period. The housing market, which until recently has had a remarkably strong year, brought in high demand for construction equipment, Caterpillar said. That was offset by lower sales to commercial and industrial markets, where construction spending has fallen. Sales of agricultural equipment were also strong, the result of new product launches and increased income among farmers. Internationally, Caterpillar said sales were down 1% to $1.99 billion. The company said it saw strong growth in markets such as China, Japan and Africa, where infrastructure projects are hungry for construction equipment. But weak markets in Germany, Canada and Latin America offset some of those gains.
