Caterpillar CEO: U.S. Economy Stronger Than Most Think
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Heavy equipment maker Caterpillar (NYSE: CAT) reported its 2011 Q4 earnings on January 26, and they were stellar: a 60% increase that beat analysts’ predictions by $.60 per share. In fact, the company claims that sales grew more during the last year than they had since 1947. Even for a mover and shaker of Caterpillar’s proportions, that’s huge.
In an interview with Susie Gharib of Nightly Business Report, Caterpillar CEO Douglas Oberhelman credits a stronger global economy for the higher sales and revenue, noting that the U.S. economy is doing better than is commonly thought. He estimates that housing starts for this year will number around 750,000, which he acknowledges is not as high as many would like, but is a great step forward. He notes that orders are up across the country--projects are being planned, and implemented. He also anticipates that Caterpillar will be creating more jobs as the company continues to grow.
That’s quite a prediction, but Caterpillar has a unique perspective on the economy—from the ground up, if you will. They know when their customers have no work, as was the case in 2009, according to Oberhelman. When the earth doesn’t move in agriculture and the building trades, well, that doesn’t make for a spunky economic climate. With North American sales up 39% last year, however, things are definitely looking up.
Caterpillar’s numbers are backed up by earnings reports from top home builders, as well. Lennar Corp. (NYSE: LEN), one of the nation’s biggest builders, saw its stock value rise by nearly 30% in the fourth quarter as new orders poured in. Other big names like Toll Brothers, KB Homes and DR Horton also saw their fortunes rise in Q4 as housing orders and backlog grew substantially.
In addition to an upbeat forecast for the U.S., Oberhelman asserts that Europe will not suffer a severe recession, something that analysts fear would negatively affect the American economy. He expects sales and earnings from Europe to be at or above 2011 levels and sees the market for heavy equipment expanding a bit in China, as well. As for the U.S., which constituted over 30% of Caterpillar’s revenue for the past two years, the company forecasts growth in the 3% range.
In addition to Caterpillar, other equipment manufacturers are also poised to benefit from a revived economy. Deere & Company (NYSE: DE) saw its farm equipment sales rise last quarter and is expanding its manufacturing base in Iowa. Terex Corp. (NYSE: TEX) has seen its stock earning upgrades based not only on its own performance, but on sentiment that predicts a much better year for heavy equipment manufacturers.
A rising economic tide floats all boats, eventually. But these companies will be at the head of the line, enjoying increased profits far ahead of other entities that will, albeit a bit later, prosper as well. A healthy construction sector means an expanding economy that will create more jobs, which is something this recovery is sorely lacking. An investor could do worse than get in on the ground floor of the economic revival by purchasing a bit of these companies. Why not let them move a few shovels full of cash your way?
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