Caterpillar Inc. (CAT), citing robust growth across all regions, reported a 48% year-over-year jump in global sales for the three months rolling period ended November 2010, virtually a reverse of the 45% drop in sales in the comparable year-ago period. October 2010 sales also grew 48%.
In May 2010, the company had recorded a growth of 11%, reversing a long trend of global decline since September 2008. Since then, Caterpillar has been on a roll, recording sales growth of 22% in June, 32% in July, 37% in August, 53% in September (the highest growth so far in 2010) and 48% in October and November.
Growth in November was led by North America posting a growth of 53%, a noteworthy improvement from the 54% decline in November 2009. The Asia Pacific region followed with sales increasing 51%, the highest growth in the region so far in 2010.
The Asia-Pacific region has been Caterpillar’s fastest growing geographic market in recent years as rapid infrastructure development and mining expansions fueled demand for machinery. The region has posted continuous growth since March 2010 after suffering declines in 2009. In November 2009, the region had posted a 31% decline.
The Latin American and EAME (Europe, Africa and the Middle East) markets both rose 43% in the period. In November 2009, the EAME markets had plunged 53% while the Latin American markets had experienced a 27% dip.
Caterpillar’s total sales for reciprocating and turbine engine for November upped 12% on a three month rolling average basis from a rise of 8% in October. In November 2009, sales were down 36%. As per sector-wise business performance, Caterpillar saw reciprocating and turbine engines sales in the industrial segment soar 52%, sales to the electric power unit rose 11% and sales to petroleum sector inched 2%. Sales to marine sector remained a weak area, dropping 4%.
Given its strong performance we believe Caterpillar is in a positon to meet its fiscal 2010 guidance range and finish the year on a good note. Caterpillar’s current revenue guidance range for fiscal 2010 is $41 billion to $42 billion, the mid-point of which suggests a growth of 28% from 2009 revenue of $32.4 billion. The EPS outlook for fiscal 2010 is in the range of $3.15 to $3.85.
We believe Caterpillar’s strong brand name, pricing power and global dealer network place it in an advantageous position to exploit the growing need for infrastructure development worldwide. We believe Caterpillar’s expansion plans of opening new facilities and expanding existing operations, particularly in emerging markets, will boost its long-term potential.
However, its severely underfunded pension plans could necessitate increased mandatory funding in 2010, affecting its capital expenditure plans We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.
Peoria, Illinois-based Caterpillar Inc. is the manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that competes globally from a principally domestic manufacturing base. Caterpillar operates three divisions – Machines, Engines and Financial Products. Caterpillar competes with the likes of CNH Global NV (CNH), Komatsu Ltd., (KMTUY) and Volvo AB (VOLVY).
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