Caterpillar "Bulldozes" Earnings, Global Growth Still On

After reporting earnings that

Caterpillar

reported earnings that "bulldozed" past estimates, and Caterpillar appears to be spreading its wings in this latest quarterly release. The Illinois-based manufacturer of mining and earth moving equipment

that blew past Wall Street estimates, and the company also raised its full year guidance, sending shares up more than 5% this morning. Caterpillar reported earnings of $1.71 per share on $15.72 billion in revenues. That is far greater than what Wall Street analysts had been expecting. The consensus on the Street expected $1.55 per share in earnings on $15.03 billion in revenues. Excluding one-time items, Caterpillar's earnings came in at $1.93 per share. In addition to the earnings beat, Caterpillar guided full year earnings to $6.75 per share, versus estimates of $6.67 per share. "I am pleased with how we're performing and optimistic about demand for our products, and that is why we are moving forward with needed investment in our business to support our long-term growth opportunities," said Caterpillar Chairman and Chief Executive Officer Doug Oberhelman. "This was the best quarter for sales in our history, and our order backlog is at an all-time high." Oberhelman went on to talk about the fact that 2012 is shaping up to be an even better year than 2011, thanks in part to Caterpillar's acquisition of Bucyrus, the mining equipment maker it purchased earlier this year. "We're having a great year in 2011, and 2012 is shaping up to be better. Our leadership team is working on plans for next year, and it looks like 2012 will see improvements in sales and revenues across our businesses," Oberhelman said. "We are continuing to increase production levels for many of our products and expect that supply will remain tight in 2012. That's why we are making strategic investments in our business to position Caterpillar for continued success well beyond 2012," Oberhelman said. "Of course, we realize the world faces economic uncertainty and risk. A key part of our planning process is to make sure we're prepared if the situation turns negative. Each of our businesses prepares 'trough' plans—a standard practice at Caterpillar—to help us act faster should we need to take action," Oberhelman added. Gabelli & Co. was

saying, "Sales were +41% to $15.7B, (ex-Bucyrus, sales were +31%). Order backlog is at an all time high of $24.4B. In the quarter, the company saw strong cash flow from machinery and power groups. Construction was strong on the equipment side, boosted by rental companies refreshing fleets. Commodity prices remain high enough to keep mining equipment demand high." Caterpillar has said that China is still a major growth driver for the company, but that competition is increasing a little bit. Chinese economic growth is slowing, having slowed to 9.1% GDP growth in the latest quarter, as the People's Bank of China tries to engineer a soft landing. Gross margin did fall in the latest quarter, as it did in the previous quarter, but as the company includes Bucyrus' products into its operating results, the company did say that margins would come down.

What is important is that Caterpillar is not seeing any signs of a major slowdown in the world's economy, which is a good thing. Companies like Caterpillar, Joy Global

, Komatsu, and to a lesser extent, Deere & Co.

are important indicators of global economic health because they make the equipment that moves the Earth. If infrastructure growth is strong across the globe, that is a good indicator that global growth is not going to experience a repeat of the 2008 financial crisis. Shares of Caterpillar trade at less than 11 times 2012 earnings, and sport a 2.1% dividend yield. Caterpillar had a rough second quarter, and went back into the cocoon, losing 5% during the second quarter, and almost 18% from March 31, 2011 to today. After this report, it looks like Oberhelman and team have finally gotten back on track, and have been able to bust out of the cocoon, and turn into a butterfly.

Traders who believe that Caterpillar's strong results bode well for other mining and equipment makers might want to consider the following trades:

Traders who believe that global growth is going to come to a halt may consider alternate positions: