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Caterpillar Announces Price Hikes

Caterpillar announces price hikes for its machinery next year, but don't look for much traction in the U.S., where the big-equipment business continues to be extremely weak.
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PEORIA, Ill. (TheStreet) -- Caterpillar (CAT) - Get Caterpillar Inc. Report will hike prices on its gear in 2011 as business booms everywhere for the company except North America and Europe.

The bulls have surrounded Caterpillar of late thanks to a series of monthly sales figures indicating that its business is on the mend, reports that have pushed the manufacturing bellwether to a string of

new 52-week highs

.

Earlier this month, for instance,

Caterpillar said worldwide machinery sales at retail

for the month ended August 10 surged by 37% from the same period of 2009, the steepest year-over-year gains for the company in 17 months.

Perhaps, then, increasing demand has emboldened Caterpillar to make the hikes. The company certainly hinted as much on Thursday.

In an 8-K filing with the

Securities and Exchange Commission

, the company said it would lift prices by as much as 2% worldwide, based on "current industry factors as well as general economic conditions."

Also, as Caterpillar already announced, it's looking to pass through the extra expense of building engines that meet new emissions regulations in the U.S., Canada and Europe. The company will bring those machines, called Tier 4, to market next year.

But some company watchers doubt whether Caterpillar will have much traction for price increases in the markets of the developed world, where business remains weak, despite the percentage upticks in retail sales reported by the company over the last few months.

Charles Yengst, a consultant to the heavy-equipment industry, said he has a hard time jibing Caterpillar's monthly retail sales gains with the data he's seen from the industry as a whole, including machinery sold in the U.S. by rivals such as

Deere

(DE) - Get Deere & Company Report

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and Japan's

Komatsu

.

As a group, heavy machinery companies have registered gains during the first half of this year of as much as 10% and as little as 2%, depending on the product type, Yengst said. Sales of a few types of machines, however, have declined from a year ago, he added.

"There's just not enough business to go around to justify buying new machines," Yengst said, referring to construction contractors hurt by the ongoing dearth of large-scale projects around the country.

The story is vastly different in the emerging economies, especially China, India and Brazil. (Caterpillar is also doing well in its mining-truck business.)

Brazil especially is booming for the yellow-machine maker, said Yengst, who just returned from a trip to Latin America's largest country. "Machine sales down there are so strong that Caterpillar on certain products could easily raise prices 4% and get away with it," Yengst said.

The company, slated to report third-quarter results on Oct. 21, has pegged ambitious growth targets for itself -- despite the tough business conditions on the home front -- based largely on robust sales in the so-called BRIC economies.

Caterpillar shares were changing hands Thursday afternoon at $78.80, down 1.5%, after briefly trading above $80 moments after the opening bell. Volume was heavy at 9.4 million shares, compared with average daily turnover of 8 million.

Deere shares, meanwhile, were trading at $69.92 Thursday, down more than 2%. Like its rival, Deere has seen its stock march to a set of 52-week highs this month as agribusiness in general has been buoyed by rising grain prices globally.

-- Written by Scott Eden in New York

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