Updated from 8:18 a.m. EDTThrough the eyes of Caterpillar ( CAT), the economy is running at full steam. The heavy-machinery giant reported another strong performance for its second quarter, and with a long backlog of orders for engines and industrial machinery heading into the back half of 2006, the company raised its sales and earnings guidance for the year. "We do not see 2006 as a peak for the industries we serve," said Caterpillar Chairman and CEO Jim Owens on a conference call with analysts. "Housing in the U.S. is weaker, but it's not collapsing. This should still be the third-best year for housing starts since 1978." While the stock market has been swinging wildly amid fears of an economic slowdown, the second-quarter performance from Caterpillar provides a reassuring sign that construction-related markets are still chugging along . The company's earnings climbed to $1.05 billion, or $1.52 a share, from $760 million, or $1.08 a share, a year earlier. On average, analysts surveyed by Thomson First Call were expecting earnings of $1.42 a share. The company's broadest top-line metric, sales and revenue, rose 13% from last year to $10.61 billion. Caterpillar's sales of machinery and engines also rose 13% to $9.96 billion, meeting Wall Street's forecasts. While the company concedes that a slowdown in the U.S. housing market could weigh on sales going forward, it pointed to strength in commercial construction, mining and energy exploration as forces that should offset that. Meanwhile, the company noted that housing starts were still on pace to hit 1.9 million in 2006, down from last year's figure, which was just over 2 million. "The sun and the moon and the stars are in line for Caterpillar right now, and they're finally absorbing their costs with pricing power that's been missing in recent years," says Eli Lustgarten, analyst with Longbow Research. "There's a lot of investments that are being made on global infrastructure and mining right now in a way that we haven't seen in decades." For all of 2006, Caterpillar now sees earnings of $5.25 to $5.50 a share, up from its previous outlook of $4.85 to $5.20 a share. Analysts forecast earnings of $5.33 a share. The company now targets sales growth of 12% to 15% from a year ago, up from the previous estimate of 10%.