Caterpillar’s 2010 forecast gets chilly reception

Despite Chief Executive James Owens’ forecast that Caterpillar’s www.cat.com revenues will gain 10 to 25 percent this year, the world’s largest maker of construction and agricultural machinery continues to suffer from a recession hangover and Q4 inventory reduction of new machine inventory by dealers.

Sales of US $7.89 billion for Q4 were down 37 percent over the same period for 2008. Profit fell by 67 percent to 36 cents per share.

Last year dealer inventories for new Caterpillar machines and engines were reduced by nearly $4 billion, but Cat expects little change in dealer inventories in 2010, which should lead to higher production and sales. In 2009 dealers reduced new machine inventories by more than $3.3 billion and new engine inventories by more than $600 million.

Owens said “the economy in 2009 was the worst our company has experienced since the Great Depression” but added that he expects 2010 revenues to gain 10 percent to 25 percent year over year as he sees signs of economic improvement, particularly in China and other developing countries.

Caterpillar expects growth in China to exceed 10 percent this year and in India eight percent. The prediction is markedly more optimistic than its expectation for growth in the U.S. of 3.5 percent and in Europe of just 1 percent.

Growth in the world economy is now beginning to drive improved demand for commodities, Caterpillar said in its quarterly report. And higher demand coupled with favorable commodity prices should be positive for mining-related sales in 2010.

Caterpillar’s rivals John Deere www.johndeere.com and Manitowoc www.manitowic.com are expected to report quarterly earnings next month.

Edited by Militza Richard

Source: Forbes.com www.forbes.com