Caterpillar looks to maintain momentum as economic recovery stumbles

Earnings Preview: Caterpillar

PEORIA, Ill. — Caterpillar Inc., the world’s largest maker of construction and other heavy machinery, reports its second-quarter earnings before the market opens on Thursday.

WHAT TO WATCH FOR: Whether Caterpillar is able to maintain the momentum of improving sales that it has built up so far this year.

The company posted strong earnings in the first quarter and said last month that its May sales were up 11 percent.

Caterpillar said it was ramping up production to meet higher demand, especially in markets like Asia, where the company is seeing its most rapid growth.

Higher commodity prices in those regions has fueled a surge in orders for mining equipment from Asian and Latin American countries. Meanwhile, the company reported recently that North American business picked up, a hopeful sign for the domestic economy.

Yet with economic indicators pointing to a slowdown in recovery from the recession, investors will likely hunt for signs of whether Caterpillar can sustain its resurgence.

WHY IT MATTERS: From construction sites to mines, Caterpillar’s black and yellow machines are a ubiquitous presence around the world. When economies are growing, Caterpillar is one of the first companies to feel it.

If governments are spending on road construction, they buy Caterpillar graders. The company’s engines power heavy trucks and oil field equipment. When builders construct a new building, they use Caterpillar backhoes.

WHAT’S EXPECTED: Analysts surveyed by Thomson Reuters expect Caterpillar to earn 85 cents per share in the second quarter on revenue of $9.8 billion.

LAST YEAR’S QUARTER: In the second quarter of 2009, Caterpillar earned $371 million, or 60 cents per share on revenue of $$7.98 billion.