Jan. 27 - Caterpillar, a bellwether for the global economy, forecasts improved economic growth in developed and developing markets. Fred Katayama reports.
Caterpillar's modestly positive profit outlook for 2014 could provide some relief for investors fretting about growth in emerging markets. Strong sales in construction and power equipment along with deep cost cuts powered profit growth sharply higher in the latest quarter, bulldozing the decline in mining machine sales, where customers cut back on spending. The world's largest mining equipment maker says an improving economy should boost demand for mined commodities and energy. It sees low inflation and low interest rates boosting growth in developed and developing countries. That mildly positive view led Caterpillar to forecast higher profit and announce a $10 billion stock buyback. Caterpillar's stock, a big underperformer last year amid the market rally, rose sharply in early trading. BMO analyst Joel Tiss was cautious, saying "... with operations looking just flat, it is hard to see how the shares stage a substantial rally unless economic growth takes a turn for the better." One concern up ahead: Caterpillar. which spent nearly $9 billion to buy mining equipment maker Bucyrus, expects mining clients to keep cutting back on investments in new equipment this year even though production is rising.