BUCY Bucyrus International, Inc. (MM)

Caterpillar Inc. (CAT) recently reported sales statistics for the month of May, indicating a strong month in which sales shot up 52% on a year-over-year basis, across the globe. However, after registering global sales growth of 66% in the month of April, the highest so far in 2011, the sales weakened in the reported month.

Region-wise, the company registered the maximum improvement in Europe, Africa, and the Middle East with a 65% year-over-year increment. Latin America followed with a 60% improvement year over year. Rest of the world and North America were at 52% and 54%, respectively.

In Reciprocating & Turbine Engine Retail Statistics, sales were up 21% year over year globally. Electric Power reported the maximum increase of 45% year over year, followed by Industrial, with a 32% year over year climb and Petroleum up 12% year over year.

However, Marine sales remained static at 27%. The sector remains the only weak link in Caterpillar's growth story. Sales growth in this category has 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 attributed 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 between $6.25 and $6.75, the highest annual profit in the company’s history. However, the outlook does not take into account the acquisitions of MWM Holding GmbH or Bucyrus International Inc. (BUCY) as these buys are yet to be closed. 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. 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. The company competes with the likes of CNH Global NV (CNH), Komatsu Ltd. (KMTUY) and Volvo AB (VOLVY).

 
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