Caterpillar Inc. (CAT), which in April reported its first quarterly loss in 17 years, added to the growing optimism about the economy by posting better-than-expected third quarter results Tuesday and forecasting earnings that surpassed even the most bullish estimates.

Net income at the world's largest heavy equipment maker fell to $404 million, or 64 cents a share, down from $868 million, or $1.39 a share, a year earlier. Revenue fell 44 percent to $7.3 billion. Profit beat analysts' expectations by 6 cents a share, according to Thomson Reuters. Shares of the Illinois-based company rose in early trading.

"We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s. We are seeing encouraging signs that indicate a recovery may be underway," said CEO Jim Owens in the earnings release. "However, the world economy is still facing significant challenges. There is uncertainty about the timing and strength of recovery."

Caterpillar expects 2009 sales of $32 billion to $33 billion on profit of $1.10 to $1.30 per share. Its previous profit forecast was 40 cents to $1.50 per share. Excluding redundancy costs, the profit forecast for 2009 is $1.85 to $2.05 per share compared to the previous range of $1.15 to $2.25 per share. The outlook topped Wall Street expectations of $1.48 a share. The previous revenue forecast was $32 million to $36 million.

As Bloomberg News noted, Owens has cut about 18,700 full-time jobs and about the same number of temporary workers since December 2008. But Caterpillar is seeing signs of improvements in economies around the world. Its preliminary revenue outlook for 2010 is an increase of 10 percent to 25 percent from the midpoint of the 2009 outlook range.

Wall Street is growing increasingly bullish about Caterpillar's prospects. Its shares have soared more than 96 percent over the last six months and have sailed past the median price target of Wall Street analysts of $50.65. Most rate it as a hold.


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