CNBC Stock Blog

Caterpillar Profit Could Rise $8 to $10 Per Share: Analyst

**FILE** Rows of heavy Caterpillar equipment sits ready for shipment at the Caterpillar plant in Decatur, Ill.,in this April 20, 2007 file photo. For American companies with operations that stretch overseas, the slumping dollar has become a fiscal life preserver amid slower domestic economic growth and waning sales. (AP Photo/Seth Perlman, file)
Seth Perlman

Even if economic growth in the U.S. is not as strong as Caterpillar is forecasting, investors can expect the company to deliver on its 2012 guidance anyway, one analyst said.

The company reported fourth-quarter profitand revenue that blew Wall Street’s expectations away on Thursday, causing its shares to trade solidly higher. Its strong performance was supported by acquisitions, increased mining equipment demand, and growth in construction machinery and parts sales.

“In the last couple years, they’ve been conservative and outperformed all expectations,” said Eli Lustgarten, senior analyst at Longbow Research. “They’re somewhat optimistic in their numbers, but they’ve executed better than the economy has.”

Caterpillar, the world’s largest heavy machinery maker, said it would continue to break records in 2012, and expects profit to rise 25 percent to $9.25 per share and revenue to increase between 19 percent and 30 percent.

“It looks like there was a lot of pre-buy in the marketplace in the fourth quarter in a lot of industries, especially construction equipment, so the $9.25 that they’re guiding to for 2012 is a midpoint,” he said. “Where around that number you’ll be is a function of how much pre-buy there was and whether the U.S. really has a 3-percent GDP number which is part of their forecast.”

Lustgarten added that he thought the company would “go to the $8 to $10 range — no problem.”

Caterpillar also plans to increase its capital expenditures to about $4 billion in 2012, an increase from $2.6 billion in 2011.

Lustgarten emphasized that Caterpillar is managed for the long-term, and that it takes multiple years for the company to increase capacity.

“That spending is a long-term investment and is not dependent on where the numbers turn out to be this year or next year,” he said.

Additional News: US Homebuilders See Surge in Potential Buyers 

Additional Views: Recent Caterpillar Buyers Got It Wrong: Pros


CNBC Data Pages:



Eli Lustgarten does not own Caterpillar stock and has no investment banking conflicts with the company.