Bloomberg News

Caterpillar Profit Beats Estimates as Mining Demand Increases

January 26, 2012

Jan. 26 (Bloomberg) -- Caterpillar Inc., the world’s largest construction and mining-equipment maker, reported fourth-quarter earnings and gave a full-year profit forecast that topped analysts’ estimates as demand rose for shovels and trucks.

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, Caterpillar said. The average of 23 estimates was for $9.10 a share.

“The mining business is going to continue to be very strong,” Brian Rayle, a Cleveland-based analyst for Northcoast Research Holdings LLC who has a “neutral” rating on the shares, said in an interview yesterday.

Producers of coal, copper and iron ore are increasing investment 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 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).

Construction of coal-fired power generation in China, India and Europe and development of copper mines in South America will support mining-equipment demand, Robert McCarthy, a Chicago- based analyst for Robert W. Baird, said in a report on Jan. 19.

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, McCarthy said. The U.S. made up 32 percent of Caterpillar’s 2010 revenue.

Caterpillar climbed 2.6 percent to $109.05 yesterday in New York. The stock has risen 20 percent this month.

risen 20 percent this month.

(Caterpillar will hold a conference call at 11 a.m. New York time. See LIVE <GO>.)

--Editors: Tina Davis, Simon Casey

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.


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