Caterpillars Earnings Gain 38% on Mining Products

aterpillar Inc., the world’s largest maker of earthmoving equipment, said second-quarter profit rose 38 percent as demand for mining trucks and power generators fueled sales.

Net income increased to $1.05 billion, or $1.52 a share, from $760 million, or $1.08, a year earlier. Sales gained 13 percent to $10.6 billion, the Peoria, Illinois-based company said today in a statement distributed by PR Newswire.

Caterpillar raised its full-year forecast for the second time this year. Customers from Canada to China invested in new mines and equipment to meet soaring demand amid higher metal and energy prices. Chief Executive Officer James Owens is expanding into areas such as refurbishing machinery and logistics to even out the company’s sales during economic swings.

“Most of the spending this cycle is being driven overseas, reflecting the industrialization of developing economies such as China, India and the Middle East,” said Jamie Cook, an analyst with Credit Suisse in New York who rates Caterpillar shares “outperform” and doesn’t own them.

Profit in 2006 will be $5.25 to $5.50 a share, up from a previous estimate of $4.85 to $5.20 made in April. Sales will increase 12 percent to 15 percent from 2005.

Shares of Caterpillar, the third-best performer in the Dow Jones Industrial Average this year, rose $1.23 to $70.31 at 7:43 a.m. in early New York Stock Exchange composite trading. They had added 20 percent in 2006 before today, trailing only General Motors Corp. and Walt Disney Co. in the Dow.

A 4.625 percent bond from Caterpillar’s financial services unit maturing in 2015 fell 0.47 cents on the dollar to 91.5 cents on the dollar yesterday, yielding 5.87 percent, according to Trace, the bond-price reporting system of the NASD.

Growing Economies

Owens, 60, is running factories at full capacity to fill sales of the biggest mining trucks, some weighing as much as a Boeing Co. 747, or about 400 tons when fully loaded. Orders for those systems have doubled since 2004 as prices for copper, coal and minerals surged with the economies of countries such as China and India.

Copper for delivery in three months rose 94 percent to $6,225 per metric ton on the London Metal Exchange in the second quarter, from $3,214 in the year-ago quarter. The price rose 28 percent from the first quarter.

China’s economy grew 11.3 percent in the second quarter, the fastest pace in more than a decade. Spending on factories and real estate accelerated in June, the Chinese statistics bureau said this week. Both are activities associated with the use of Caterpillar’s machinery.

Oil Prices

Emerging markets also are expanding their energy usage, driving demand for Caterpillar products. The company makes power generators used on oil platforms, and equipment that converts oil field gases and methane into energy. It also makes marine engines used in oil tankers.

Oil prices averaged $70.66 a barrel in the second quarter, 33 percent higher than the year-ago period’s $53.25. They rose 11 percent from the first quarter.

Cook expected Caterpillar to earn $1.42 in the second quarter, matching the average of 12 estimates in a Thomson Financial survey. Thomson doesn’t disclose to Bloomberg News what is included in the projections.

Estimates average $1.27 a share in the third quarter and $5.33 for the full year, according to Thomson. Cook expects $5.50 for the year.

Source: www.bloomberg.com