CAT Backs View, Sells Bucyrus Partly - Analyst Blog

Caterpillar Inc. ( CAT ) has reaffirmed its previously stated outlook for fiscal 2011and fiscal 2012 and maintained its dividend of 46 cents per share.

During its third quarter earnings call, the company had stated that excluding the impact of the Bucyrus acquisition, fiscal 2011 revenues will be around $56 billion and earnings will come in at $7.25 per share. Including Bucyrus, revenues are estimated at roughly $58 billion and EPS at $6.75.

For 2012, Caterpillar expects revenues to be up 10% to 20% from the 2011 outlook of about $58 billion. The 2012 guidance includes a full year of Bucyrus-related sales of about $5 billion, up from a partial year estimate of about $2 billion in 2011.

Caterpillar has also decided to maintain its quarterly cash dividend of 46 cents per share. The dividend will be paid on February 18, 2012, to shareholders on record at the close of business on January 20, 2012. In June this year, Caterpillar had upped its quarterly dividend by 2 cents to the current level of 46 cents. Caterpillar has been a consistent payer of quarterly dividends since its formation in 1925.

In a separate development, Caterpillar has sold a part of the Bucyrus distribution business to the Industrial Division of Sime Darby Berhad for $360 million. The deal is the first of several that are expected to transition the product distribution and support of former Bucyrus machinery to Cat dealers that support mining customers around the world.

The deal includes the Sime Darby Industrial Cat dealerships operated by Hastings Deering in Queensland and the Northern Territory of Australia, Papua New Guinea and New Caledonia. Caterpillar also intends to start selling former Bucyrus mining products through Sime Darby's other Cat dealerships.

The portion of the former Bucyrus distribution businesswas included in Caterpillar's purchase of Bucyrus Inc., a South Milwaukee-based manufacturer of surface and underground mining equipment, in July 2011. The $8.8 billion buyout was the biggest deal ever in Caterpillar's history. It capitalized on the rising demand for coal and minerals triggered by growth in emerging nations.

The Caterpillar-Bucyrus combined portfolio broadens Caterpillar's mining equipment product line, resulting in the most expansive product offering in the mining equipment industry. Furthermore, Caterpillar can leverage Bucyrus' strong presence in the emerging markets, its successful aftermarket parts business and support services for its equipment. The Bucyrus acquisition positions Caterpillar as the leading global mining original equipment manufacturer. The combined product portfolio dwarfs Joy Global Inc. ( JOY ), the only other manufacturer of surface and underground mining equipment in the US.

Caterpillar is riding the wave of heightened construction and mining activity in the developing markets, answering to a demand for coal, copper and iron ore. The company expects this demand to continue expanding over the next decade. We expect Caterpillar to maintain its revenue and EPS growth trajectory, fueled by rapid industrialization in the emerging markets. Further, given its strong balance sheet and cash position, we expect another dividend increase from Caterpillar.

Shares of Caterpillar presently retain a Zacks #3 Rank (short-term Hold recommendation).

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 ).

CATERPILLAR INC ( CAT ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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