BUCY Bucyrus International, Inc. (MM)

Caterpillar Inc. (CAT) maintained its sales growth trajectory in April, registering a global sales growth of 66% in the reported month, the highest so far in 2011. The monthly sales growth was a stark improvement over the 4% decline during the same period last year.

April results complete a year of positive growth for the company since May 2010, when it had reversed a long trend of global decline from September 2008.

After kickstarting 2011 with a 49% year-over-year jump in global sales in January, Caterpillar has maintained the momentum with February and March posting increases of 59% and 61%, respectively, and now April taking the curve further to a growth level of 66%.

Region wise, the company reported a whopping increase of 72% in Latin America, where sales improved remarkably after declining 2% in the year-earlier period. In the Rest of the World segment sales improved 66% compared with a 9% growth last year.

Asia Pacific and North America vied for the third position, reporting an increase of 65%. Asia Pacific and North America had recorded growth  rates of 38% and 15%, respectively, a year ago. EAME (Europe, Africa and Middle East) followed closely with a sales growth of 64% over last year’s decline of 8% in April sales.

The company also reported turbine engine sales for the month of April, registering a 25% increase globally compared with a 21% decline in the prior-year period.

Electric Power reported the maximum increase of 45% compared with a 14% decline a year ago. Following the Electric Power sector was the Industrial segment with sales up 28% in April versus a 5% growth in the prior-year period. Petroleum sales closed in at position three increasing 25% compared with a 29% drop in the year-earlier period.

However, the Marine segment witnessed sales continuing to decline at 27% after falling 35% in the year-earlier period. The Marine sector remains the only weak link in the Caterpillar sales growth story. Sales growth in this category have been negative since September 2009.

During the recently reported first quarter, Caterpillar’s revenues surged 57% to $12.95 billion, surpassing the Zacks Consensus Estimate of $11.20 billion. The increase in revenues was attributable to continued economic growth and improvement from the low levels of machine demand in the first quarter of 2010.

We expect Caterpillar to maintain its revenue growth trajectory aided by growth in emerging markets as well as construction and mining activities in developing countries. Increased domestic and international infrastructure spending, improved economic conditions and benefits from the yet-to-be closed acquisitions will support revenues over the next several years.

For 2011, Caterpillar expects revenues in the range of $52 billion to $54 billion and EPS of $6.25 to $6.75, the highest annual profit in the company’s history. However, the outlook does not include the acquisitions of MWM Holding GmbH or Bucyrus International Inc. (BUCY) as they have not yet closed.

The acquisitions are expected to close by mid 2011. We expect a revision in guidance and our estimates once these deals conclude. Based on  the sales data so far we believe Caterpillar is well on track to deliver its promise. We currently have a Zacks #1 Rank (short-term Strong Buy recommendation) on the stock.

Peoria, Illinois-based Caterpillar Inc. is the manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company is one of the few leading U.S. companies in an industry that competes globally from a principally domestic manufacturing base. Caterpillar operates three divisions – Machines, Engines and Financial Products. Caterpillar competes with the likes of CNH Global NV (CNH), Komatsu Ltd. (KMTUY) and Volvo AB (VOLVY).

 
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