Caterpillar 4th-Quarter Profit Up on International Sales

Tue February 05, 2008 - National Edition

CHAMPAIGN, Ill. (AP) Caterpillar Inc., one of the world’s largest construction equipment makers and an economic bellwether, said Jan. 25 its fourth-quarter earnings rose 11 percent on strong international growth.

The company said it expects overseas sales to drive solid profit growth this year as well, with the United States teetering on recession.

The company earned $975 million, or $1.50 per share, compared with $882 million, or $1.32 per share a year earlier.

Revenue rose 10 percent to $12.14 billion from $11 billion in the prior-year period.

Analysts were expecting a profit of $1.50 per share on revenue of $11.79 billion, according to a poll by Thomson Financial.

Caterpillar Chief Executive Officer Jim Owens said strong economic growth outside the United States would offset weak domestic demand.

“Global markets for mining, energy and infrastructure development are booming,” he said in a statement.

Caterpillar expects U.S. economic growth to slow to 1 percent this year, including continued weakness in home construction.

The company is predicting profits will grow by 5 percent to 15 percent in 2008, and sees revenue rising 5 percent to 10 percent year-over-year. The prediction implies 2008 profit of $5.64 to $6.18 per share on revenue of $44.06 billion to $46.16 billion.

“While we expect anemic growth in the U.S. economy, we continue to see positive conditions for our sales in most of the rest of the world,” Owens said.

“We expect the world’s robust investment in infrastructure to continue well into the next decade, and we’ll need more capacity to serve our customers,” he said.

Caterpillar has continued to expand beyond U.S. borders in recent years. Almost 60 percent of its fourth-quarter sales were outside North America, an almost 10 percent increase from just a year earlier.

The company said it benefited from the weak dollar, which makes American products cheaper overseas. Currency fluctuations added $334 million to fourth-quarter revenue, Caterpillar said.

Morningstar analyst John Kearney doubts Caterpillar can maintain the 30 percent to 40 percent growth the company managed in some of its overseas businesses last year. But even with a pronounced slowdown Caterpillar could record double-digit growth in international sales.

“As long as there’s not a global recession, I guess, I think they can weather a weaker U.S. market,” he said.

For the quarter, Caterpillar’s profit was up 7 percent to $619 million in its machinery segment and up 14 percent to $571 in engine sales.

Peoria-based Caterpillar’s sales by region illustrate just how the weakening American economy affected the company.

Revenue from the sale of heavy machinery such as bulldozers dropped 7 percent in North America but rose by 40 percent in Asia and the Pacific and 32 percent in Europe, Africa and the Middle East.

U.S. new-home construction fell during two of the quarter’s three months, including a 14.2 percent drop in December, according to the U.S. Census Bureau.

Caterpillar’s North American engine sales fell 23 percent in the fourth quarter, but increased 31 percent in Asia and the Pacific and 31 percent in Europe, Africa and the Middle East.

Robert W. Baird & Company analyst Robert McCarthy noted, however, that 14 cents of Caterpillar’s fourth-quarter earnings per share were due to a lower-than-expected tax rate.

“Stronger than expected revenue growth was offset by continued manufacturing efficiency issues,” he wrote.

Caterpillar spokesman Mike DeWalt attributed much of the problem to the slowdown in engine sales that curtailed production.

The company plans to spend $2.3 billion this year to add production capacity to deal with order backlogs of construction equipment and other products, a 35 percent increase.

“And based on what we see, we need it,” DeWalt said.

Caterpillar said its full-year profit was $5.37 a share, up 4 percent from 2006. Revenue was $44.96 billion, an 8 percent increase over the previous year.

Analysts had expected income of $5.36 per share on revenue of $44.54 billion.

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