Caterpillar’s Breakthrough First Quarter

10 Best Stocks for 2012China and Brazil both tapped the brakes on their overheating economies, and yet Caterpillar‘s (NYSE:CAT) record first-quarter profit still easily beat Wall Street expectations.

Canny acquisitions and a truly global footprint helped the company exceed expectations even as revenue fell short. That sort of resilience in the face of a global slowdown bolsters the case for Caterpillar as my top stock pick for 2012 — and one of InvestorPlace’s Ten Best Stocks for 2012.

The world’s biggest manufacturer of construction and mining equipment said first-quarter profit rose 29%, to $1.59 billion, or $2.37 a share, up from $1.23 billion, or $1.84, a year earlier. That eclipsed Wall Street’s view by a wide margin. Analysts on average forecast earnings of $2.13 a share, according to data from Thomson Reuters.

Revenue advanced 23%, to a $15.98 billion, which was well short of the Street’s forecast for $16.22 billion. However, were it not for some smart strategic deals in the mining industry, revenue would have been far weaker. Excluding the acquisitions of Bucyrus International and Motoren-Werke Mannheim, the top line would have increased just 15%.

Those investments in the mining sector and the breadth of CAT’s operations across developing and developed markets allowed it to power through the most recent quarter despite slower business in China and Brazil. Other emerging markets remained robust, the company said, as did the need for replacement products in Europe even as the Continent struggles with recession.

But perhaps most important was the good old U.S.A. Orders for durable goods may have slowed last month by their largest amount in three years, but domestic demand was still a pillar of CAT’s profitability.

“We’re seeing strong global demand for most mining products and significant growth in replacement demand for products in the U.S., which more than offset slowing in China and Brazil,” CEO Doug Oberhelman said in a media release.

True, some troubling questions remain. CAT raised its full-year earnings outlook, but only by the same amount by which the company exceeded estimates in the first quarter. Revenue did come up short, and a protracted slowdown in China throws the future trajectory of CAT’s stock into doubt. No wonder shares in the Dow component were off sharply Wednesday even as the blue-chip index tacked on a triple-digit increase.

Yes, traders may be dumping the stock, but that just provides an opportunity for investors to buy it more cheaply. CAT just logged a record quarter and has a record order backlog on its books — and that’s when the global economy isn’t even firing on all cylinders.

“We remain on track for another record-breaking year in 2012 at a time when U.S. construction activity remains depressed and economies in Europe, China and Brazil have slowed,” Oberhelman noted.

At this point, CAT looks like a coiled spring. It’s executing efficiently and pumping out profits amid global sluggishness and uncertainty. When economic prospects in both developed and emerging markets show signs of improvement, CAT’s shares will have a lot of catching up to do.

“Improvement in [China and Brazil], better growth in Europe in the coming years and our view that the U.S. will continue to improve is why we are so focused on improving factory efficiency and putting additional capacity in place,” Oberhelman said. “We have a record order backlog today, and we need to be ready for continued growth.”

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