Strong overseas sales propel Caterpillar
Caterpillar Inc. parlayed an increased reliance on international markets to surprisingly strong sales and a 13-percent jump in first-quarter profits, impressing investors who expected the heavy equipment maker to be slowed more by the weak U.S. economy and dollar.
The Peoria-based manufacturer's stock leapt more than 8 percent in Friday trading after it easily beat Wall Street's earnings estimates, benefiting from its strategy of diversification.
Shares rose $6.69, or 8.5 percent, to close at $85.28 Friday and were up more than 40 percent since mid-January to within $2 of their all-time high, despite what CEO Jim Owens characterized as a depressed market for construction equipment in North America.
Even though the housing market slowdown limited sales in the U.S. and Western Europe, Caterpillar's stepped-up push into emerging markets and the oil-and-gas, marine, and parts-and-service businesses paid off in a 30-percent leap in international sales.
Sales were up 37 percent in the Asia-Pacific region, 30 percent in the Europe-Africa-Middle East region and 24 percent in Latin America, compared with just 4 percent in North America.
"The good news in overseas business far outweighed the bad news domestically," said Matt Collins, an analyst with Edward Jones. "The key is that they diversified from both a product and a geographic standpoint, and it should continue to pay off for them."
Caterpillar executives said the weak dollar had an overall negative impact on the bottom line, with raw materials and other costs up at its international plants. But in sales alone, the currency impact added $310 million in the quarter.
The strong results demonstrated how well exporters can do in the right markets -- particularly, in Caterpillar's case, China, India and Russia.
"This plays well to our strengths -- having a global footprint and global, diversified products," Chief Financial Officer Dave Burritt said in an interview. "Clearly we're seeing international trade as a win-win, and a great opportunity continues."
Caterpillar earned $922 million, or $1.45 per share, in the January-March period, compared with $816 million, or $1.23 per share, a year earlier. That blew past the $1.33-per-share estimate of analysts surveyed by Thomson Financial.