Caterpillar Profit Beats Estimates as Mining Demand Increases
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Caterpillar Inc. reported fourth-quarter earnings and gave a full-year profit forecast that topped analysts’ estimates as demand rose for shovels and trucks.
“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.
Source: (Jan. 26, 2012) Bloomberg Businessweek
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