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Caterpillar Beats Expectations on Foreign Demand
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Construction and mining equipment company Caterpillar said Tuesday quarterly earnings rose a greater-than-expected 34 percent as strong growth in emerging economies offset weakness in North America, Western Europe and Japan.
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The company also raised its full-year outlook, despite what it warned would be significantly higher material costs in the second half, sending its shares modestly higher in premarket electronic trading.
Caterpillar, a component of the Dow Jones industrial average and a U.S. business bellwether, reported a second-quarter profit of $1.11 billion, or $1.74 a share, compared with $823 million, or $1.24 a share, a year earlier.
Sales rose 20 percent to $13.64 billion.
Analysts, on average, expected the Peoria, Illinois-based company to earn $1.54 a share on sales of $11.87 billion, according to Reuters Estimates.
"Never in my 35 plus years with the company have I seen Caterpillar do so well in the face of such a difficult economic climate in the United States," Jim Owens, the company's chairman and chief executive, said in a statement.
In North America, Caterpillar said economic conditions in construction and quarrying continued to deteriorate during the quarter, offsetting some improvements in commodity sectors.
It characterized the downturn in U.S. housing as "the worst environment since the 1930s." The softness spread to nonresidential construction during the quarter as "banks tightened lending standards for commercial and industrial loans, property prices softened and vacancy rates increased," Caterpillar said.
But strength in Asia, where machinery sales surged 50 percent during the quarter, more than offset weakness there and in Western Europe.
China continued to be a big area of strength, but Indonesia, which is benefiting from high coal prices and strong construction growth, also contributed to Caterpillar's gains.
In premarket trade, Caterpillar [CAT
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] shares were up about 1 percent at $73.98.
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