Caterpillar

DOW JONES NEWSWIRES

Caterpillar Inc.'s (CAT) fourth-quarter net income increased 4.3%, helped by its machinery and engines business, and the Dow component maintained its 2007 outlook.

For 2007, the company expects per-share earnings of $5.20 to $5.70 a share. In October, the Peoria, Ill., heavy-equipment maker said earnings would be flat to up 10% from the midpoint of its 2006 earnings outlook of $5.05 to $5.30 a share.

Caterpillar sees 2007 revenue of $41.5 billion to $43.6 billion, which is flat to up 5% from 2006. The company said in October 2007 sales would be flat to up 5% year over year.

Analysts expect, on average, per-share earnings of $5.54 on revenue of $41.06 billion.

Shares of Caterpillar rose $1.37, or 2.3%, to $61 in premarket trading.

Caterpillar's fourth-quarter net income rose to $882 million, or $1.32 a share, from $846 million, or $1.20 a share, a year earlier.

Revenue jumped 14% to $11 billion from $9.66 billion a year earlier. The company's three principal lines of business all fared well. Sales of machinery, the company's largest business, rose 13%, while engine sales increased 17% and financial products revenue was up 9%.

On average, analysts polled by Thomson Financial expected earnings of $1.34 a share on revenue of $10.5 billion.

Caterpillar's outlook has remained strong for many of the industries it serves, including oil and gas production, mining, large infrastructure projects and non-residential construction.

But this has been overshadowed by a slowing U.S. housing market, bottlenecks in the company's supply chain and its inability to produce its machinery fast enough to meet demand.

Caterpillar said U.S. economic growth was stronger than expected for the fourth quarter, rebounding from a weak third quarter. The company sees the Federal Reserve keeping interest rates steady well into 2007 rather than having to react to a rapidly deteriorating economy, as Caterpillar said seemed likely last quarter.

Last week, Caterpillar said the market cycle for machinery makers appears to be similar to a decade ago, with a slowdown likely to last a year or two before higher earnings return.

Analysts have said the current year could be difficult as far as demand for light-construction equipment goes, with high inventories for Caterpillar dealers and slower home-building activity potentially leading to a discount in machine prices.

On Monday, Caterpillar shares hit a 52-week low of $57.98 after plunging nearly 15% in October, the largest one-day drop in 19 years, after third-quarter results were lower-than-expected and the company trimmed its 2006 product outlook. Caterpillar's 52-week high was $82.03 on May 10.

-Jonathan Vuocolo and Josee Rose; 201-938-5964; jonathan.vuocolo@dowjones.com, josee.rose@dowjones.com

(END) Dow Jones Newswires

01-26-07 0819ET

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