Rama see you next earnings
FOCUS-Caterpillar posts record fourth-quarter profit
(Adds analysis, company comments, byline. Prvs Peoria, Ill.)
By Brad Dorfman
CHICAGO, Jan 21 (Reuters) -Heavy equipment maker
Caterpillar Inc. CAT.N on Wednesday surprised Wall Street
with record fourth-quarter profits of $451 million, driven by a
sharp increase in sales despite declines in Asia.
The company said recent sales declines in Asia did not have
a material impact on results. But it added the company was
carefully monitoring the significant economic slowdown in Asia,
where it said recessions were likely next year in South Korea,
Thailand and Indonesia.
Net income, equivalent to $1.22 a share, was up from the
$381 million, or $1 a share, posted in the year-ago quarter. It
exceeded the consensus analyst estimate of $1.12 a share,
according to the First Call research service.
The per-share increase of 22 percent outpaced the 18
percent boost in net income because of Caterpillar's
large-scale stock repurchase program, which left less shares
outstanding.
The primary contributor to soaring profits was a 17 percent
increase in physical sales volume, which measures sales in
constant dollars, factoring out price increases, a company
spokeswoman said, without giving further statistical details.
The Peoria, Ill.-based company also racked up record
fourth-quarter revenues of $5.19 billion, the first time
Caterpillar has passed the $5 billion mark and a 16 percent
jump from last year's fourth quarter revenue of $4.465 billion.
Caterpillar reiterated its forecast that sales in 1998 will
be slightly above the record $18.93 billion of 1997 and $16.52
billion in 1996, excluding the acquisition of Perkins Engines,
which is expected to be completed in the current quarter.
Profit in 1998 is expected to be near the record $1.67
billion, or $4.44 per share, reported for 1997.
Caterpillar said industry-wide demand for machines is
expected to be slightly down in 1998 due to sharp declines in
the Asia-Pacific region.
The company said the ultimate resolution of events in Asia
depends on actions taken by Asian governments and world
monetary authorities.
"A significant change in the Asian economic climate or an
extension of these events into other areas of the world could
impact Caterpillar," the company said in a news release. "Plans
are in place to respond to such changes if they develop. The
situation is being reviewed carefully on an ongoing basis."
The company said recessionary conditions are likely to
persist in Japan in 1998, and industry demand is forecast to
decline further.
But the company also noted that sales from the Asia-Pacific
region, which includes Australia, made up only about 25 percent
of 1997 sales.
A company statement said recessions were likely in
Thailand, South Korea and Indonesia, and slower growth was
forecast for China, Malaysia and the Philippines.
Chief Financial Officer Douglas Oberhelman noted that what
he termed as the four most heavily affected Asian countries --
Malaysia, the Philippines, Thailand and Indonesia -- accounted
for only about 5 percent of Caterpillar's worldwide sales.
"Asia may be down, but the good news is the rest of the
world isn't," Oberhelman said in a news conference.
Caterpillar saw increased demand for industry products in
the United States, Canada, Europe and the former Soviet Union.
Analysts said perceptions of Caterpillar's exposure to Asia
has unfairly hurt the stock in recent weeks.
"People have said, 'This company sells in Asia, we'd better
sell the stock.' That's unreasoning," said Alexander Blanton,
an analyst at Ingalls & Snyder Llc. "It doesn't take into
account what can happen in other areas of the world because of
lower interest rates. The U.S. housing market is accelerating.
That could be a big source of growth for Caterpillar this
year."
James McCann, an analyst at Merrill Lynch & Co. Inc., noted
the company has positioned itself well in the last several
years to adjust to financial conditions in various parts of the
world.
Caterpillar stock was up $1.69 at $46.69 in late
consolidated trading on the New York Stock Exchange.
(--Brad Dorfman, Chicago Equities News at 312 408 8787,
chicago.equities.newsroom@reuters.com)
REUTERS
Rtr 21:27 01-21-98
Copyright 1998, Reuters News Service |
