Caterpillar Raises Sales Forecast, Targets $40 Billion Global Infrastructure Boom
By Mike Caggeso
Associate Editor
Caterpillar Inc. (CAT) raised its sales forecast for 2010 to $60 billion, a 20% raise, and a sign of confidence that gave its stock a generous boost yesterday (Tuesday).
The original forecast was $50 billion. The company kept its profit prediction at $8 to $10 a share in the next two years, Bloomberg reported.
"We’ve got crumbling bridges and roads here in North America, and we’re going to have to spend significantly to fix that," Chief Executive Officer Jim Owens told analysts and investors in Las Vegas. "The same is true of Western Europe. The emerging markets are building from the ground up."
With its trademark yellow-and-black heavy equipment, Caterpillar is a major U.S. exporter, and a highly visible presence on residential, commercial and public works construction sites worldwide. Cat has benefited greatly, through the years, from emerging-markets growth.
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And its eyes are targeting the $40 billion global infrastructure boom.
Most recently, in its fourth-quarter earnings report, the Peoria, Ill.-based heavy-equipment manufacturer cited "recessionary conditions" in the United States as a reason to shift the bulk of its business overseas. Sales and revenue in North America dropped 11%, but were boosted by business in Europe, Africa and the Middle East [up 34%], Latin America [up 18%] and Asia [28%].
"It’s a positive sign that they reiterated the forecast for 2010, but the market is in disbelief" Caterpillar will reach profit of $8 to $10 a share, Eli Lustgarten, an analyst with Longbow Research, told Bloomberg. "There’s a big level of spending in there."
Money Morning considers Caterpillar a "Global Titan," a multi-national company that harvests a hefty percentage of their sales and profits from the foreign markets. Many such companies are based in the United States, but are growing at several times the tepid pace that’s being predicted for the U.S. economy this year.
Global titans offer diversification, should the U.S. market falter completely and stumble into a recessionary pothole. At the same time, the U.S.-based firms offer the safety of the much-more-stringent U.S. regulatory oversight.
And Money Morning has identified a portfolio of Global Titans whose quarterly earnings and stock prices are laughing in the face of the gloomy U.S. market: The Coca-Cola Co. (KO), PepsiCo Inc. (PEP), Diageo PLC (DEO), Yum! Brands Inc. (YUM), McDonald’s Corp. (MCD) and The Boeing Co. (BA).
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