This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Caterpillar 2Q Profit Jumps But Shares Tumble

Stocks in this article: CAT

JOSH FUNK

Continued robust demand for Caterpillar's heavy equipment boosted the company's second-quarter profits by 44 percent, but higher costs and cautious comments about China's economy sent shares sliding Friday.

The company even bumped up its sales outlook for the year. Still, cost increases â¿¿ mostly related to its recent acquisition of mining equipment maker Bucyrus â¿¿ will prevent rising sales from boosting profit more than previously expected.

Caterpillar's quarterly profits fell short of Wall Street estimates for the first time since the recession ended, and its shares tumbled as much as 10 percent in the morning before recovering in the afternoon to trade about 5 percent down.

Many investors that were very optimistic about Caterpillar appeared to pause and reassess the prospects for months ahead, said Edward Jones analyst Jeff Windau, who believes Caterpillar still has strong long-term growth potential.

"There's a lot to digest in this quarter," Windau said.

The Peoria, Ill., company said it generated $1.02 billion net income, or $1.52 per share. That's up from $707 million, or $1.09 per share, a year ago.

But the Bucyrus acquisition cut into second-quarter profit and weighed down Caterpillar's outlook. Without it, quarterly profit per share would have been $1.72.

That was still below Wall Street expectations of $1.74, according to a poll of analysts by FactSet. And Credit Suisse analyst Jamie Cook said that many investors were expecting Caterpillar to report earnings per share above $2.

Revenue grew 37 percent to $14.2 billion, easily topping Wall Street estimates.

Caterpillar predicts 2011 sales between $56 billion and $58 billion with Bucyrus. Previously, it predicted sales between $52-and-$54 billion.

However, overall sales growth that would have added 50 cents to per-share earnings this year have been offset negatively by about $700 million of costs associated with the Bucyrus deal, which were about $200 million higher than expected.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,399.67 +19.26 0.12%
S&P 500 1,904.01 +17.25 0.91%
NASDAQ 4,316.0740 +57.6360 1.35%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs