Caterpillar (CAT)

The new president has made a pledge to spend money on infrastructure across the United States because he believes it is a way to strengthen the economy. While the country is spending money to build/maintain roads and bridges, CAT will reap the benefits of increased demand for their equipment. The president-elect has proposed a so-called "infrastructure bank," aimed at investing $60 billion over 10 years. Estimates of what the United States needs are even higher, with the American Society of Civil Engineers estimating the need for $1.6 trillion over 5 years. In their opinion, this would only upgrade the country's infrastructure to "good." Regardless, there will be increased spending on infrastructure and, because of this, CAT will see increased demand in the U.S.

CAT’s international basis will lead to profits from the drive for Asian infrastructure, energy, and mining opportunities.

Whereas CAT has traditionally been considered a cyclical business, this label is being reevaluated as CAT maintains strong revenue and profit growth despite a major downturn in the US construction industry during 2008. A large part of this continued growth stems from CAT's greater international presence and the worldwide infrastructure boom discussed above, yet at the same time CAT has diversified into new areas such as financial products and long-term service contracts, which ensure the company continued revenue for years after the sale of a piece of machinery. These changes should help sustain earnings even in times of slack demand.

Caterpillar Inc. (NYSE: CAT) announced the fifth straight year of record sales and revenues and the fourth consecutive year of record profit. For 2007, sales and revenues were $45 billion, up 8%, and profit per share was up 4% from 2006. The company also reported record fourth quarter sales and revenues of $12 billion, 10% higher than the fourth quarter of 2006, and profit per share up 14% from a year ago.

Caterpillar's overall global sales for the past year were very strong, more than “offsetting weakness in the North American market,” allowing CAT to remain profitable and healthy in spite of weakness in the US Market.

This kind of support from overseas markets makes this economic slowdown (not yet a recession) different from past periods. For example, in the 1990-1991 recession and recessions before that (and during previous economic slowdowns), CAT and other U.S. manufacturers did not have the kind of support from markets outside the U.S. that exists today.