Caterpillar (CAT) Reports 67% Jump in Q2 Profit Despite 'Depressed' Construction Activity in US

July 25, 2012 9:40 AM EDT
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Caterpillar (NYSE: CAT) shareholders are cheering the company's second-quarter 2012 results Wednesday morning as management called the period ending June 30th, 2012 its "best quarter in history". The stock is up more than 4 percent to $85.13 at last check.

Sales for the construction and mining equipment company totaled $17.37 billion, up 22 percent from revenue of $14.23 billion reported in the same quarter last year. Analysts were expecting total sales of $17.11 billion.

Revenue to the company's Construction unit rose 8 percent to $5.34 billion, sales to the Resource unit were up 68 percent to $5.39 billion, and sales to the Power Systems unit rose 12 percent to $5.51 billion. Cat Financial saw sales decline 1 percent to $690 million.

Net income surged 67 percent from $1.015 billion in the year-ago quarter to $1.699 billion, or $2.54 on a per-share basis. The Street was expecting Caterpillar to report quarterly EPS of $2.28.

The company's Chairman and CEO, Doug Oberhelman, said, "Caterpillar's success in 2012 is occurring despite U.S. construction activity that remains depressed and well below the prior peak, the problems facing Eurozone economies and economic concerns in China. While we're expecting a record year in 2012, we understand the world is facing economic challenges, and if it becomes necessary, we are prepared to act quickly as we did in late 2008 and 2009. While we're prepared, the good news is, this doesn't feel like 2008. Interest rates are low, central banks are prepared to inject more liquidity if needed, and housing is coming off lows, not a peak, and seems to be improving."

Cat narrowed its FY12 sales outlook from $68-$72 billion to $68-$70 billion, which compares to the Street estimate of $69.5 billion. EPS guidance was boosted from about $9.50 previously to about $9.60. The Street is looking for FY12 EPS of $9.54. Cat said the outlook could be attributed to "the offsetting impact on sales in the worldwide markets we serve with costs resulting from our extensive global manufacturing footprint and cost base."

One analyst from Wells Fargo has already weighed in on Caterpillar's results. The firm's Andrew Casey pointed out Caterpillar acknowledged the following while still beating and raising: "(1) an increased tax rate outlook, (2) a 9% backlog decline and 5% inventory increase on a 9% revenue increase from Q1 2012 (China reduction initiatives to occur in H2 2012), (3) some evidence of mining customer deferral, and (4) a reduction in some of its end market outlooks, including North American housing starts."

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