Caterpillar Inc. (CAT) has kicked off 2011 with a 49% year-over-year jump in global sales in January 2011, a stark contrast to the 27% drop in sales in January 2010. This marks the ninth consecutive month of positive growth for the company since May last year when it had reversed a long trend of global decline from September 2008.
The favorable outcome during the month, fast becoming a routine at this company, was led by North America with sales increasing 58% compared with a 40% decline in January 2010. The Latin American markets closely followed with a growth of 56% in the reported month, a noteworthy improvement from the 15% decline in January 2010. EAME (Europe, Africa and the Middle East) upped 46% compared with a drop of 35% in the previous year. Asia Pacific posted a growth of 38%, another substantial improvement from the 1% growth in January 2010.
As per sector-wise business performance, Caterpillar saw sales in the industrial segment jumping 31%, sales to the electric power unit soaring 59% and sales to the petroleum sector bouncing 42%. Sales to the marine sector remained a weak area, dropping 34%. Sales to the petroleum sector went up 42%.
Caterpillar’s January results sustained the sales momentum exemplified in its fiscal 2010 performance. The company’s fourth quarter adjusted EPS increased almost four fold to $1.47 and fiscal 2010 adjusted EPS almost doubled to $4.15 from the prior-year comparable periods driven by an ever-increasing demand for mining and construction equipment.
Revenues in the quarter were $12.8 billion, a 62% jump from $7.9 billion in the year-ago period and well above the Zacks Consensus Estimate of $11.4 billion. Region wise, North America led the pack with a growth of 78%, followed by Latin America, Asia-Pacific and EAME markets posting impressive growth rates of 59%, 55% and 49%, respectively.
Caterpillar expects its sales to cross the $50 billion mark in fiscal 2011. This translates into a 17% year-over-year growth from sales of $42.6 billion recorded in fiscal 2010. Developing countries are expected to maintain their growth trajectory along with improving economies in North America and Europe.
Caterpillar’s strong brand name, pricing power and global dealer network enable it to take advantage of the growing need for infrastructure development worldwide. Caterpillar’s expansion plans of opening new facilities and expanding existing operations, particularly in the emerging markets, will boost its long-term potential.
The Bucyrus acquisition will not only enhance Caterpillar’s product line and increase its presence in the emerging markets; it will strengthen its position as the #1 mining equipment manufacturer in the U.S. We currently have a Zacks #1 Rank (short-term Strong Buy 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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