Caterpillar CEO on Company’s 60% Jump in Profits

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: A bullish forecast about the global economy from Caterpillar (NYSE:CAT) today. The world`s leader in bulldozers and excavators expects sales to grow as much as 20 percent this year. The company also predicted the global economy avoids a recession. And you know Tom, those comments came as Caterpillar (NYSE:CAT) reported record quarterly earnings, posting a gain of 60 percent.

TOM HUDSON, NIGHTLY BUSINESS REPORT ANCHOR: Susie, a lot of optimism here, that performance an important economic indicator across sectors because Caterpillar`s business comes from infrastructure and agriculture spending not only in the U.S., but really across the globe. Here are those numbers. Caterpillar (NYSE:CAT) earning $2.32 per share, surpassing estimates by almost $0.60 per share. These results Susie cap a year in which Caterpillar (NYSE:CAT) saw sales grow at their fastest pace since 1947.

GHARIB: Investors were encouraged. Caterpillar (NYSE:CAT) stock rose almost 2 percent and it was the best performer in the Dow. A short while ago, I talked with Caterpillar (NYSE:CAT) CEO Douglas Oberhelman and asked him what areas will fuel growth this year?

OBERHELMAN: Growth issues are going to come and 2012 is going to come from just about everywhere in the world. At the midpoint at $70 billion we`ll be up about 16, 17 percent on sales which is pretty good. Our profit is up 25. But if you really look at it, U.S. is a strong contributor to that. And that`s very interesting because I think underlying economy here in the United States is stronger than most people appreciate. It`s not great. It needs a lot of help. We`re not out of the — off the life-support yet but fundamentally things are better than people appreciate, I think.

GHARIB: Doug, talk us through why you are so bullish. Because yesterday the chairman of the Federal Reserve said that he is expecting weak economic growth in the U.S. We also heard this week from the IMF also calling for weak global economy. And China where you do a lot of your business is also seeing signs of a slowing economy. So it seems like are you seeing things differently.

OBERHELMAN: Well, we see the economies a little more optimistically I think than many because of the fundamental nature of what we do around infrastructure. Secondly our growth is really growing faster than the industry`s reserves. So we`re doing some things to help our business over and above what`s happening in the markets we are serving. We`re very happy about that. But take the U.S. Interest rates are very low. We`re in the sixth, seventh year of a housing, deep housing recession. We`re calling for about 750,000 housing starts this year. It will probably be somewhere around that. That`s still very low. There`s still lots of upside to come down the road. If you compare the economy today back to where we were in 2008, it`s a lot stronger fundamentally. The banks are stronger. We just have better news across the board that I think will help pull this thing forward.

GHARIB: Well, you also said in your report today that you see construction finally recovering in 2012. What are you hearing from your customers that you can make a statement like that?

OBERHELMAN: Almost everywhere I go there`s something that`s happening. Around Chicago area here in the state of Illinois, the contractors up there are operating at a very low level but there`s jobs going on. There`s dirt being moved. You hear that all around the country. And little by little that momentum is gaining. Remember, we really suffered in `09. Our customers really, really shrunk their business, saw it disappear in front of their eyes. So they`re coming back from pretty low numbers and little by little building that back. And suddenly that`s creating some demand for us and we like that, obviously.

GHARIB: You`re also pretty positive about Europe. Are you saying that Europe can avoid a bad recession like so many other people have been predicting?

OBERHELMAN: We can see a mild recession in Europe that won`t impact the rest of the world all that greatly. And I think that`s what we are set up to see. Because we do see some fairly good activity around some of the countries in western Europe. Outside of western Europe, Africa, Middle East, very good numbers and a lot of growth. So there`s not all bad news in western Europe, some bad news for sure.

GHARIB: You reported today that Caterpillar`s performance was its best year-over-year since 1947. And you also reported record order backlogs. It sounds like you are going to need a lot more hands on deck to do all that business. Are you going to be adding more jobs?

OBERHELMAN: As we grow 17 percent top line next year and hopefully beyond, we will need more help, more workers, a great sign of a growing company and hopefully a growing economy.

GHARIB: But in terms of your stock doing well, what is a key thing that needs to happen in whatever sector for you to keep up this momentum?

OBERHELMAN: Well, I think we have just got to keep doing what we are doing. Drive for cash flow, profit ability, work on the fundamentals of our business, serve our customers better than anybody else and shareholders tend to like that and we`ll attract them as a result.

GHARIB: And you can watch my full interview with Caterpillar (NYSE:CAT) CEO Doug Olberhelman on our web site. Just go to feature videos on nbr.com.


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