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By Mike Caggeso
Caterpillar Inc.’s (CAT) last week reported a 21% gain in third-quarter profit, but then cut its earnings outlook for the rest of the year, citing the slowing U.S. economy and the lousy U.S. housing market.
The Peoria, Ill-based ]heavy-equipment manufacturer reported net income of $927 million, an increase of 21% from the $769 million reported for the comparable quarter a year ago. Cat reported per-share earnings of $1.40, a jump of 23% from earnings per share of $1.14 from the third quarter a year ago.
Revenue rose 8.8% to $11.44 billion.
“We continue to see remarkable growth outside of the United States, with particular strength in key industries like mining, oil and gas, electric power and marine engines,” Caterpillar Chairman and Chief Executive Officer Jim Owens said. “The industries we serve are becoming increasingly global, and the investments we are making to achieve our 2010 goals have us well positioned to meet their needs.”
With its trademark yellow-and-black heavy equipment, Caterpillar is a major U.S. exporter, and a highly visible presence on residential, commercial and public works construction sites worldwide. Cat has benefited greatly, through the years, from emerging-markets growth.
This year’s third quarter was no exception: Despite the weak North American construction market, Cat eked out the revenue gain largely from those overseas sales, and from some retail development.
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Overall, sales and revenues in North America fell 11% (or $615 million), while every overseas market posted significant gains — Europe/Africa/Middle East up 36% (or $963 million); Latin America up 30% (or $191 million); and Asia/Pacific also up 30% ($386 million).
Its 2007 estimates seesaw even more. And Cat didn’t mince words in pointing out why outlook for the rest of this year – slow U.S.GNP growth and weak housing starts. For this year, Cat says sales would reach $44 billion, and that its revised and reduced profits per share would range between $5.20 and $5.60 a share, versus $5.17 a share last year.
Cat had been predicting revenue of $44 billion, and per-share earnings of $5.30 to $5.80.
For 2008, Cat’s preliminary projections call for revenue growth of 5% to 10% and profit growth of 5% to 15% over the midpoint of 2007.
Sales outside North America are expected to be up 25% (about $4.6 billion), offsetting an anticipated 12% decline ($2.5 billion) in North America revenue, further widening the chasm between the perceived robustness of the domestic and overseas markets.
The company said it expected to exceed its $50 billion target for sales in 2008, thanks largely to this international growth.
Cat’s earnings report includes a has a surprisingly frank and informative Q&A that sounds off on the U.S. economy, the central bank rate cut, the health of the mining industries and the trends in foreign currencies.
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