For years, Caterpillar's earnings have come to rely more and more on international markets. When the U.S. home-building market went bust in 2007, Caterpillar was still recording brisk sales of its giant earth-moving equipment in China. In the first quarter of 2008, international sales of bulldozers and excavators accounted for 58 percent of Caterpillar's revenue.
When the entire global economy contracts at a 2 percent annual negative growth rate, even the mighty Caterpillar stumbles, but on Tuesday morning, the company predicted that it would do steadily better as the year went on, largely because of, you guessed it, growth in international markets. Stimulus plans worldwide, with their heavy emphasis on transportation infrastructure, are very, very good for Caterpillar. And while the U.S. stimulus is moving slower than a dumptruck in quicksand, in China, the money is flowing. From Bloomberg:
"We are seeing signs of stabilization that we hope will set the foundation for an eventual recovery," Chief Executive Officer Jim Owens said in a statement today. "Credit markets have improved significantly. Fiscal policy and monetary stimulus have been introduced around the world, and we are seeing signs, particularly in China, that they are beginning to work."
Time's Justin Fox points out that Brazil and India are also growing markets for the American company.
It's the story of the BICs (for Brazil, India, China).... Those three countries seem to hold the key to whether the global economy will recover in a robust way or just sputter along for the next few years. And Caterpillar, more than almost any other U.S.-based company, is poised to benefit if the BICs do boom. It actually exports stuff (construction equipment and engines, to be precise), in a big way. The U.S. economy could use a lot more of that.
Some may see U.S. dependence on these foreign upstarts as chipping away at the foundations of the hegemonic power of the 20th century's most dominating superpower. But I feel a sense of relief. It's time to let someone else carry the load. The global economy is heavy.