Caterpillar: Global Sales Offset 'Recessionary Storm'


Caterpillar reported a better-than-expected quarterly profit Friday as strong international sales more than offset what the company characterized as a "recessionary storm in the United States."


The news sent shares of Caterpillar -- the world's largest maker of construction and mining equipment, a component of the Dow Jones industrial average and a U.S. business bellwether -- up as much as 4.7 percent in premarket trade.

Construction booms outside North America, particularly in Russia, Africa and energy-producing regions like the Middle East, boosted results, and the weak U.S. dollar aided the company's competitiveness overseas.

First-quarter profit rose 13 percent to $922 million, or $1.45 a share, from $816 million, or $1.23 a share, a year earlier.

Sales increased 18 percent to $11.8 billion.

Analysts, on average, had expected the Peoria, Illinois-based company earn $1.33 a share, according to Reuters Estimates.

"We continue to see robust demand for products used in the global mining and energy industries and for machines used by our customers to build infrastructure, particularly in emerging markets," Chairman and Chief Executive Officer Jim Owens said in a statement.

Caterpillar said it expects another "record year," with sales increasing 5 percent to 10 percent over 2007 and profit per share rising 5 percent to 15 percent.

But it also forecast weakness in the U.S.

Caterpillar's Record Q1

residential construction and on-highway engine markets and "further weakening in North America." "If you look at the United States, their outlook there is weakening even more," said John Kearney, an analyst at Morningstar.

"On the flip side, it seems like their international outlook is improving." He said the exception internationally was in Western Europe, where there are signs of slowing in the residential construction market and of a knock-on effect on nonresidential building.

In the first quarter, Caterpillar's machinery sales rose 16 percent, engines sales increased 22 percent and financial product revenue rose 18 percent.

Its financial services arm reported a profit despite the turmoil in credit markets that has forced other heavyweights like General Electric to post disappointing results.

"Much better engine results, bigger volume internationally, weaker profitability in machines," said Eli Lustgarten, an analyst at Longbow Securities.

"It's a net positive quarter." But he added, "I'm not sure it's as strong as it looks." Caterpillar said results were buoyed by a $60 million gain from the sale of its investment in ASV, a maker of construction vehicles, to rival Terex Corp.

Lustgarten estimated the deal added 8 cents to Caterpillar's per-share earnings.

Caterpillar shares were last up 4.4 percent at $82.10 in premarket trading after closing Thursday at $78.59.