Caterpillar stands to benefit as Japan rebuilds

Caterpillar Inc., the largest construction-equipment maker, may be among the U.S. companies to benefit as Japan rebuilds after the world's strongest earthquake since 2004, said analysts at Susquehanna Financial Group and Sterne Agee & Leach Inc.

Caterpillar may see sales of excavators and wheel loaders rise as Japan reconstructs buildings that crumbled from last week's 8.9-magnitude earthquake, said Larry De Maria, a New York-based analyst for Sterne Agee who has a “neutral” rating on the company's stock. Shares of Japanese builders have rallied amid speculation that they will benefit from recovery efforts.

“There will be several hundred billions in reconstruction over several years,” De Maria said in a telephone interview today, referring to the dollar estimate. “Caterpillar and other equipment manufacturers will be in a position to support the efforts.”

Caterpillar, which employs about 5,000 people in Japan, isn't concentrating on potential orders, Jim Dugan, a spokesman for the Peoria-based company, said in an e-mail today.

“We are not focused on that but rather the continued safety and security of employees and providing support and aid for the wider rescue efforts,” Dugan said.

The company said it hasn't received any reports of damage to its major operations in Japan or injuries to its workers.

The Caterpillar Foundation is giving $1 million to the American Red Cross for disaster relief efforts in Japan and will match a maximum $500,000 in contributions from Caterpillar employees, retirees and dealers, according to a statement. The company's Japanese business unit in Tokyo also has pledged $1 million, primarily from equipment donations.

“After the initial shock wears off in Japan and reconstruction takes hold, Caterpillar equipment including power generation and construction equipment is likely to experience an increase in demand,” De Maria said.

Caterpillar and Tokyo-based competitor Komatsu Ltd. should be two of the biggest beneficiaries, Ted Grace, an analyst for Susquehanna in Boston, said in a telephone interview.

“The question is over what time frame?” Grace said. “These areas will take years to rebuild.”

Komatsu, like Caterpillar, is a global manufacturer. If Komatsu experiences disruptions to domestic operations, it could tap factories in other parts of the world to meet demand, Grace said.

Companies including Manitowoc Co. of Manitowoc, Wisconsin, and Westport, Connecticut-based Terex Corp., which both make cranes, may see an increase in orders, Grace said. Susquehanna is a market maker for Caterpillar, Manitowoc and Terex.

Terex has no market presence in Japan and expects Japanese companies to meet demand, a company spokesman, Michael Bazinet, said in an e-mail today.

Joy Global Inc., a Milwaukee-based mining-equipment maker that sells drills and shovels, also may see an increase in orders from coal miners as the world “rethinks” the use of nuclear energy in the aftermath of the earthquake, De Maria said. Japan is working to prevent a nuclear meltdown after a second blast rocked an atomic plant north of Tokyo.

The full effect of Japan's devastation on the global economy remains unclear and has the potential to moderate demand for capital goods, De Maria said.

Caterpillar rose $1.49, or 1.5 percent, to $101.51 at 2:52 p.m. in New York Stock Exchange composite trading. The shares rose 6.8 percent this year before today.