Cat buoyed by renewed economy, restructuring

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PEORIA, Ill. — Glen Barton, Caterpillar Inc. chairman and chief executive, is starting to express a certain confidence in the economy that hasn’t been present for some time.

Barton says he now expects the heavy equipment maker’s first quarter to be, “better than anticipated.”

Yesterday, shares of Caterpillar (CAT/NYSE) jumped US$3.38, or 6.4 per cent, to $56.06 on the news.

If the economy is indeed on the cusp of recovery, there is perhaps no better stock to own than Caterpillar. The largest maker of heavy machinery in the world and the third-largest maker of power generation equipment, after General Electric and Siemens, Caterpillar has historically seen its fortunes ebb and flow with the overall economy.

Indeed, its shares always have acted as a kind of barometer of business conditions.

“They’ve got the downside handled,” says Susan Byrne, who oversees US$$3.8-billion as founder and chief investment officer of Dallas-based Westwood Management. “There is a heck of a lot of upside here.”

Byrne says she bought Caterpillar shares for the first time last year when the stock was around $45, recognizing that a perennial disappointment had been transformed.

“This was not a bet on the economy,” she says. “I was interested because this was a company changing itself.”

She’s estimates the stock will be in the range of $80-$90 by 2005.

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