Caterpillar posted another impressive jump in quarterly profits Thursday and predicted more sales growth next year, but the world's largest maker of mining and construction equipment also offered a tepid forecast for global economic growth.
The company said it earned $792 million net income, or $1.22 per share, in the third quarter thanks to strong sales in developing nations. That's 96 percent higher than last year's $404 million, or 64 cents per share, but those 2009 figures were based on exceptionally weak sales at the end of the recession.
Caterpillar's results are considered a strong indicator of global economic health because its machinery is used all over the world. Its revenue jumped 53 percent to $11.13 billion from last year's $7.3 billion.
Caterpillar said it expects the global economy to grow by about 3.5 percent in 2011. But the company predicts developing regions will see higher growth rates of nearly 7 percent while the more established economies of the United States, Europe and Japan are likely to record about 2.5 percent growth.
The outlook is similar to that of many economists. The International Monetary Fund is projecting 4.2 percent growth for the global economy in 2011.
The Peoria, Ill.-based company isn't predicting when economic growth might improve, but CEO Doug Oberhelman said the world can't remain at these anemic levels forever.
"The world cannot grow very long at these low rates. It's just untenable. Something will happen at some point and we will go and pick up," Oberhelman said.
To encourage economic growth, Oberhelman said U.S. policy makers should support pro-business initiatives and avoid creating trade tensions between the United States and its key trading partners.
Caterpillar also sees potential risks to the global economic recovery as developed countries seek to cut budget deficits and pull back from stimulus programs. Its major concerns are that central banks might not provide enough liquidity to boost the economy and that the banks might end stimulus spending too soon.
Caterpillar easily beat analyst expectations of $1.09 earnings per share on revenue of $10.48 billion. The company's stock rose initially Thursday and set a new 52-week high of $81.20 before falling to lose $1.33, or about 1.7 percent, to trade for $78.55 in the afternoon.
Edward Jones analyst Jeff Windau said the stock price decline might reflect some investor concern about Caterpillar's profit growth possibly slowing next year, but investors may simply be taking profits. Caterpillar's stock price has surged since June when it was selling for around $56.
But Windau said Caterpillar's quarterly results were impressive.
"The company is doing a great job of taking advantage of the global growth opportunities they're seeing," Windau said.
Caterpillar boosted its earnings outlook for the rest of 2010 to between $3.80 and $4 per share. Previously, it predicted earnings between $3.15 and $3.85 per share.
The maker of yellow-and-black equipment said economic growth in developing regions, such as Asia and South America, played a key role in the improved quarterly sales figures. But it also said sales in developed nations, such as the United States, have improved from last year's low levels.
The biggest sales growth in the quarter came in Latin America, where Caterpillar's revenue nearly doubled to $1.76 billion. Caterpillar's revenue grew 55 percent in North America and 51 percent in Asia.
The slowest region for Caterpillar was Europe, Africa and the Middle East, where revenue still grew 31 percent.
Caterpillar officials said even though the economy remains slow in developed nations, some of the company's customers are reaching a point where their machinery is simply worn out and needs to be replaced. Those upgrades will help sales even before the economy improves.
Caterpillar said it has hired about 6,200 full-time employees and 9,000 part-time and contract workers as demand increased this year, but Caterpillar is still trying to limit its costs and its employment levels remain below last year.
Caterpillar Inc.: http://www.cat.com