Caterpillar Inc., the largest construction and mining-equipment maker, posted fourth-quarter earnings and forecast full-year profit that topped analysts’ estimates as demand rose for shovels and trucks.
Fourth-quarter net income rose to $2.32 a share from $1.47 a year earlier, the Peoria, Illinois-based company said in a statement today. The average of 21 analysts’ estimates compiled by Bloomberg was for $1.73 a share. Profit in 2012 will be about $9.25 a share, Caterpillar said. The average of 23 estimates was for $9.10. The stock rose 2.5 percent in New York.
Caterpillar is capitalizing on increasing investment from producers of coal, copper and iron ore to meet rising demand from emerging economies. Capital spending at “major” mining companies is expected to climb 25 percent this year, according to data compiled by Bloomberg Industries. Caterpillar said it had a record $29.8 billion backlog of orders at the year-end and that its capacity will constrain sales in 2012.
“It’s a very solid report, well ahead of expectations, driven by top-line growth and operational execution,” Larry De Maria, a New York-based analyst for William Blair & Co. who has an “outperform” rating on the shares, said in an interview. “The outlook is especially robust, driven by mining and construction equipment replacement.”
Caterpillar climbed to $111.80 at 9:20 a.m. in New York. The shares advanced 20 percent this month before today.
The company forecast 2012 sales of $68 billion to $72 billion, as much as 20 percent higher than 2011’s revenue of $60.1 billion. Fourth-quarter net income rose 60 percent to $1.55 billion from 968 million a year earlier while sales increased 35 percent to $17.2 billion from $12.8 billion.
A tax benefit also helped Caterpillar beat analysts’ estimates in the fourth quarter, said Stephen Volkmann, a New York-based analyst for Jefferies & Co. who has a “buy” rating on the shares.
Caterpillar said it expects sales of construction machines to improve in developed countries in 2012. Machinery sales in the euro region will be at or above 2011 levels despite the debt crisis there, it said. Monetary easing in China will lead to a “modest recovery” in sales in the country this year, Caterpillar also said.
The company is betting on further growth in the mining industry with its acquisition of Bucyrus International Inc. in July for $8.8 billion including debt, which added shovels and drills to its product range. Caterpillar also agreed in November to buy Hong Kong-based ERA Mining Machinery Ltd. for as much as HK$6.89 billion ($890 million).
A recovering U.S. economy, signs that China may ease lending and India’s depletion of coal stockpiles are positive developments in commodity demand since December, Michael Sutherlin, chief executive officer of Milwaukee-based mining- equipment maker Joy Global Inc., said on Jan. 24.
U.S. construction spending has risen 5.8 percent through November from March, when it reached the lowest level since October 1999, according to U.S. Census Bureau data. U.S. earthmoving-machinery volumes will increase as much as 12 percent in 2012, Robert McCarthy, a Chicago-based analyst for Robert W. Baird, said in a report on Jan. 19. The U.S. made up 32 percent of Caterpillar’s 2010 revenue.
The focus for Caterpillar in 2012 will now be on ensuring enough capacity to meet strong demand, De Maria said.
Caterpillar will concentrate on “continuing to improve quality, our investment in product development, integrating our acquisitions and adding production capacity,” Chief Executive Officer Doug Oberhelman said in the statement.
“We’re very tight on production capacity for many of our products and are continuing to invest in new and existing factories,” he said. “Our investments in capital expenditures and R&D will certainly add cost in 2012, but it’s the right thing to do.”