Caterpillar 4th quarter profit rises 4 percent

/ Source: The Associated Press

Caterpillar Inc., the world's largest maker of heavy construction equipment, said Friday its fourth-quarter profit rose 4 percent as higher operating costs partially offset strong sales.

But its shares rose more than 2 percent in morning trading as the company forecast strong 2007 results.

Net income grew to $882 million, or $1.32 per share, up from $846 million, or $1.20 per share, a year ago, but fell short of Wall Street's expectations. Analysts surveyed by Thomson Financial predicted earnings per share of $1.34.

The heavy equipment maker said revenue for the quarter that ended Dec. 31 rose 14 percent to $11 billion, up from $9.66 billion a year ago.

"I'm anticipating great things for Caterpillar in 2007. Despite a sharp decline in two key North American industries — on-highway truck engines and U.S. housing — and an expected reduction in dealer inventories, we are projecting another record year in 2007," Chairman and CEO Jim Owens said in a statement. "We expect to improve profit per share at a higher rate than sales and revenue, and that means a key focus in 2007 will be cost management."

Peoria-based Caterpillar's full-year profits for 2006 topped $3.5 billion, up 25 percent from about $2.8 billion in 2005. Profit per share rose to $5.17 last year from $4.04 in 2005.

Full-year revenues climbed 14 percent to $41.5 billion from $36.3 billion in 2005.

Caterpillar posted its third straight year of record profits and revenue in 2006 and forecast another record year in 2007.

The company predicts revenue in a range from $41.5 billion to $43.6 billion, which is flat to up 5 percent. Profits are forecast in a range from $5.20 to $5.70 per share.

Caterpillar said last year that a four-year sales surge would slow in 2007, with a weak residential housing market and drop in sales of truck engines holding back revenue growth.

But the company called the slowdown a pause, not the end of a sales surge that has doubled revenues since 2002.

Looking beyond 2007, Owens said the company projects revenues will top $50 billion, with compound annual growth in profit per share of 15 to 20 percent from 2005 to 2010.

Caterpillar shares rose $1.34, or 2.1 percent, to $60.97 in morning trading on the New York Stock Exchange. Its shares have traded in a 52-week range of $57.98 to $82.03.

The company designs and manufactures construction and mining equipment, as well as engines for earth moving and construction equipment. It also is the world's leading manufacturer of electrical generators.