(Reuters) - Caterpillar Inc (CAT.N), the world’s largest maker of construction equipment, raised its 2012 profit forecast on Wednesday and said the global economy was slowly improving amid pockets of weakness.
The outlook came after Caterpillar posted a quarterly profit that trounced Wall Street forecasts due to higher sales of bulldozers, marine engines and mining trucks.
Sales rose 31 percent in North America, helped by the 2011 acquisition of Wisconsin-based mining equipment provider Bucyrus. The continent is Caterpillar’s strongest growth area, executives said on a conference call with investors.
In Europe, the Middle East and Africa, sales rose 15 percent, although sales of excavators and backhoes were flat.
Business for many customers has not returned to pre-recession levels, but aging equipment is forcing them to invest in new machines, a boon for Caterpillar.
“You just get to a point where (large equipment) gets to the end of usable life, and you get into a replacement cycle,” Caterpillar chief financial officer Ed Rapp said in an interview. “Contractors, even if they’re doing the same amount of work as before, just have to buy new machines. That’s a factor that we’re definitely seeing in our numbers.”
Sales to energy and rail customers are the strongest product growth areas, with housing showing “some signs of stabilizing,” Rapp said.
The company raised its annual earnings forecast by a dime a share but beat second-quarter expectations by 26 cents, making the new 2012 target easier to hit. Still, analysts cautioned that Caterpillar — like the rest of the world — is not yet out of the woods.
“It’s not that there’s lots of fear in Caterpillar numbers, but everyone is affected by the much weaker global outlook,” said Longbow Research analyst Eli Lustgarten. Caterpillar is “beginning to see signs of it across their business, though their business is still holding up for this year.”
Executives warned that Caterpillar’s third quarter typically is slower due to summer production slowdowns, which could dampen sales.
If necessary, Caterpillar is willing to take the same defensive actions it took in 2008 and 2009, Caterpillar Chief Executive Officer Doug Oberhelman said. During that period, the company laid off thousands of workers and temporarily furloughed others to cut costs.
“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,” Oberhelman said. “The good news is, this doesn’t feel like 2008.”
Many of Caterpillar’s customers did not buy new machinery from 2008 through 2010 due to credit constraints and a lack of business. Now, to replace aging machines, they are rushing into the market, helping lift Caterpillar’s backlog to $28.2 billion, up 11 percent from a year ago.
For the second quarter, Caterpillar reported a profit of $1.67 billion, or $2.54 per share, compared with $1.02 billion, or $1.52 per share, a year earlier.
Analysts on average expected earnings of $2.28 per share, according to Thomson Reuters I/B/E/S.
Revenue rose 21 percent to $17.37 billion. Analysts expected $17.11 billion.
The company now expects to earn $9.60 per share in 2012, up from a previous forecast of $9.50.
For the year, analysts expect a profit of $9.54 per share.
The results and outlook came after Caterpillar said on Tuesday that its global retail sales for the quarter had risen 11 percent from a year earlier.
After Caterpillar posted results, its shares rose nearly 5 percent in early trade. Caterpillar came off its highs after weak U.S. housing data but remained up more than 1 percent at $82.39 in afternoon trade.
About 800 workers at Caterpillar’s Joliet, Illinois-based plant have been on strike since May 1. The workers have rejected the company’s latest contract offer, saying proposed pay raises were too small and healthcare costs too high.
Caterpillar denied on Wednesday that the strike was harming production. “We have not missed any shipments to our customers because of the strike and do not foresee any shipping issues,” it said.
The factory makes hydraulic components and other systems for Caterpillar loaders and mining trucks. The company has been staffing the facility with temporary hires and office workers since the strike began.
Reporting by Ernest Scheyder in New York; Editing by Lisa Von Ahn