2012 Caterpillar Outlook Optimistic

The 2011 fourth-quarter earnings has shown that most companies are still laser-focused on whittling down costs to wring every ounce of profit from sluggish, or nonexistent, revenue growth.

However, Caterpillar is in a different camp though, and after a record-breaking year the heavy equipment make says it expects to add costs in 2012 through increased capital expenditures and R&D.

“We expect 2012 to be a new sales record at a time when construction activity in the United States and Europe—two large markets for us—are still depressed,” said Chairman and Chief Executive Doug Oberhelman.

“Our employees and suppliers have done a great job taking care of our customers, but we have to be prepared for recovery in the developed world beyond 2012 and continuing growth in emerging markets.”

It may be a bit easier for Caterpillar to be so upbeat after a fiscal year and quarter that were the best in the company’s history. Caterpillar earned $4.9 billion in profit on $60.1 billion in revenue in 2011, up 83% and 41% respectively from the prior year.

In the fourth quarter, Caterpillar earned $1.5 billion on a record $17.2 billion in revenue, the latter up 35% from a year ago and well above the consensus analyst estimate of $16.1 billion.

On a per-share basis, Caterpillar crushed the consensus estimate of $1.73 with earnings of $2.32.

Despite a challenged global growth environment due largely to Europe and slower expansion in China, Caterpillar booked its biggest revenue increase since 1947 and its best sales and profit figures since 2008.

The company is not resting on its laurels either, steaming forward with the integration of acquisitions like mining equipment maker Bucyrus and upping its commitment to growth by spending some of the cash it generates.

For 2012, Caterpillar expects revenue of $68-$72 billion — the Street expects $67.3 billion — and EPS of $9.25 at the midpoint, well above the consensus$9.05.

Though Caterpillar has an upbeat outlook, it did warn of risks to its economic view, chief among them policy mistakes.

Shares of Caterpillar were up 4.5% to $114.00 Thursday, a few bucks shy of its 52-week high. Other agriculture and construction equipment makers, including Deere & Co and Manitowoc, were higher  as well.

McDonald's Profits Soar

McDonald’s beat the Street on Tuesday by posting an 11% jump in fourth-quarter profits.

McDonald’s, the world’s largest hamburger chain, enjoyed strong quarterly sales growth and its best U.S. results since 2006.

The Oak Brook, IL-based blue-chip company said it earned $1.38 billion, or $1.33 a share, last quarter, compared with a profit of $1.24 billion, or $1.16 a share, a year earlier.

Analysts had been calling for EPS of $1.30.

Revenue rose 9.8% to $6.82 billion, compared with estimates of $6.81 billion. Operating margins expanded to 31.1% from 29.9%.

Global same-store sales climbed 7.5% last quarter at McDonald’s, highlighted by a 7.3% leap in Europe and 7.1% rise in the U.S. The company said its U.S. same-store sales were the strongest since 2006.

“During 2011, McDonald’s continued momentum drove higher profitability and market share gains as we fortified our leadership position around the world,” CEO Jim Skinner said in a statement. “We are enhancing the customer experience – from our menu and service to our value and convenience – while giving more people more reasons to visit McDonald’s more often.”

McDonald’s also revealed its December sales figures, saying global same-store sales increased by a robust 9.6%, beating estimates for a rise of just 6.6%. U.S. same-store sales climbed 9.8%, while European sales soared 10.8%.

Sales in the company’s Asia-Pacific, Middle East and Africa segment rose by a more modest 6.5%.

Skinner said McDonald’s plans to invest $2.9 billion of capital in 2012, with half of that money dedicated to opening more than 1,300 new restaurants and the rest to be deployed on upgrading existing locations.

Shares of McDonald’s had a muted response to the earnings beat, inching up 0.1% to $101.50 ahead of Tuesday’s open.

The company’s stock is flat so far this month, but soared almost 34% over the past year.

Kodak File Chapter 11

Of course, most analysts agree that doesn’t mean Kodak is down for the count. Quite the opposite.

But to see the premier powerhouse of the film age trying to shed debt and restructure to survive is sad. Kodak gave us the first mass-market camera, the Brownie, as well as the first instant cameras.

Anyone who has followed the rise of digital imaging over the last 15 years might shrug this off as inevitable. But Kodak actually made a genuinely solid effort to transform with the digital age.

It just hasn’t been quite nimble enough. Indeed, there’s one critical element that, had Kodak pulled it off, might have prevented the current trek through bankruptcy protection. It’s a great lesson for any company faced with weathering a disruptive change in its industry.

The bottom line is that in any transformation, you need to embrace the right business model. Kodak made a lot of changes to its core business model in the 1990s and 2000s.

It rolled out a line of digital cameras, sold inkjet printers, and bought a photo sharing site called ofoto.com, which it eventually rebranded Kodak Gallery.

Those all sound like smart and reasonable decisions, the company seemed to move with the industry, but it wasn’t enough. In particular, Kodak was still implicitly married to an outdated business model that relied on people printing their photos.

Kodak’s EasyShare brand, for example, married cameras and desktop printers in a way that emphasized convenient and frequent snapshot printing.

Ofoto, despite some photo-sharing pretensions, has always been little more than a vehicle for ordering prints. What Kodak missed, or ignored, is that the dynamics of photography have changed. Digital photography isn’t just about a transition to bits instead of silver halide.

Digital photography is about freedom from printing. People don’t print photos anymore, as they now share photos online. Indeed, even the fundamentals have changed in that people don’t take photos with bulky cameras at special occasions anymore.

Cameras, or more accurately, cameraphones, are a ubiquitous part of everyday life in a way that George Eastman could only have dreamed about.

That means that Kodak, had the company recognized that customers no longer wanted to print but rather wanted to share online, would have been smart to deemphasize its printer business and build its online property, ofoto, into something more than just an easy way to upload and print photos.

The real future business model for digital photography was destined to be social media.

General Motors Regains Top Spot

General Motors has bounced back from bankruptcy and sold 9.026m vehicles last year to again claim the number one carmaker position.

General Motors regained its mantle as the world’s top-selling carmaker from Toyota last year, but faces a challenge to stay on top this year as its rival rebuilds its business after being affected by disasters in both Japan and Thailand.

GM, which has bounced back from bankruptcy less than three years ago, said on Thursday that it sold 9.026m vehicles last year, up 7.6% from 2010, with its Chevrolet brand setting a sales record of 4.76m.

The Detroit-based carmaker’s return to the top comes after its 2009 taxpayer-funded bankruptcy restructuring allowed it to cut spiralling legacy costs.

Toyota’s sales fell an estimated 6% in 2011 to 7.9m, hit by severe production cuts following an earthquake, tsunami and nuclear crisis in Japan and deadly floods in Thailand.

GM is headquartered in Detroit, Michigan and employs 209,000 people, doing business in some 157 countries.

General Motors produces cars and trucks in 31 countries, and sells and services these vehicles through the following divisions/brands: Buick, Cadillac, Chevrolet, GMC, Opel, Vauxhall, and Holden, as well as two joint ventures in China.

GM’s OnStar subsidiary provides vehicle safety, security and information services.

The company has reported annual profits since 2010. It can carry forward previous losses to reduce tax liability on future earnings. 

The Wall Street Journal estimated the tax break, including credits for costs related to pensions and other expenses can be worth as much as $45 billion over the next 20 years.

In 2010, General Motors ranked second on the list with 8.5 million units produced globally.

General Motors is one of the leading users in renewable energy. The company has published principles regarding the environment and maintains an extensive website to inform the public.

In 2008, General Motors committed to engineering half of its manufacturing plants to be landfill-free. In order to achieve its landfill-free status, production waste is recycled or reused in the manufacturing process.

GM introduced the Chevrolet Volt in 2010, an electric vehicle with back-up generators powered by gasoline. The production Chevrolet Volt was available in late 2010 as a 2011 model with limited availability. GM delivered the first Volt during December 2010.

Homebuilder Confidence Increases

Confidence among U.S. homebuilders rose in January to the highest level in more than four years as sales and buyer traffic improved.

The National Association of Home Builders/Wells Fargo sentiment gauge increased to 25 this month, exceeding the median forecast of economists surveyed by Bloomberg News and reaching the highest level since June 2007, the Washington-based group said today.

Readings lower than 50 mean more respondents still said conditions were poor.

Record-low borrowing costs, a growing population and reduced prices may drive demand for homes this year even as another round of foreclosures threatens to weigh on the market.

The confidence measure, which increased for a fourth straight month, improved in all four regions of the U.S.

This is “yet another indication of the gradual but steady improvement that is beginning to take hold in an increasing number of housing markets nationwide,” Bob Nielsen, chairman of the National Association of Home Builders and a builder from Reno, Nevada, said in a statement.

The median forecast of 44 economists surveyed by Bloomberg News projected the index would climb to 22 from December’s reading of 21. Estimates ranged from 20 to 25.

The gauge, which was first published in January 1985, averaged 54 in the five years leading to the 18-month recession in December 2007. It reached a record low of 8 in January 2009.

Other reports today showed factory production climbed in December by the most in a year and wholesale prices unexpectedly dropped.

Manufacturing output increased 0.9 percent last month, more than double the 0.4 percent gain in November, figures from the Federal Reserve showed.

Assembly lines churned out more business equipment and construction materials, according to the report, showing the improvement in housing is staring to ripple through the world’s largest economy.

The producer price index fell 0.1 percent in December, the second decline in the past three months, according to data from the Labor Department.

The builders group’s index of current single-family home sales increased to 25 this month, also the highest since June 2007, from a reading of 22 in December.

The figure shows new construction of single-family houses may rebound after what may be the weakest year since records began in 1959. Starts may have finished 2011 at 423,000 dwellings, according to Bloomberg News calculations.

The worst year was 2009, when 445,100 homes were started.

A measure of sales expectations for the next six months increased to 29 in January, the highest since September 2009, from 26, today’s report showed. The gauge of buyer traffic rose to 21, the highest since June 2007.

Builders in the Northeast led the increase, with that region’s index rising 9 points to 23 this month. In the West, the measure climbed 5 points to 21, while smaller gains were reported for the Midwest and South.

At Lennar Corp., the third-largest U.S. builder by revenue, orders jumped 20 percent in the three months ended Nov. 30. Demand rose to 3,027 homes for the company’s fourth quarter from 2,520 a year earlier, Lennar stated.

Facebook IPO Expected In May

According to multiple sources on Monday, Facebook’s long-anticipated initial public offering (IPO) is now likely to come in the third week of May.

That means that the company must file its IPO documents within the next month, given that the review by the Securities and Exchange Commission (SEC) usually takes about three to four months.

That suggested timeline assumes there are no issues, of course, such as a turbulent market or thornier-than-usual questions from regulators that require amending the filing.

Groupon, for example, filed for its IPO in early June but did not go public until five months later, in November.

In any case, the Facebook offering is expected to be one of the largest IPOs ever — with some reports saying the company will be raising $10 billion on a $100 million valuation.

That amount is presumably to match its huge consumer growth and also revenue explosion. Users now number 800 million — a figure that is likely to hit one billion this year.

Revenue, which was reportedly close to $4 billion in 2011, is expected to be higher by another third in 2012.

Facebook will need the strong numbers if it wants to impress investors, although the social networking site’s leadership insists that it remains focused on products over dollars.

In an interview with The Wall Street Journal last week, Facebook cofounder and CEO Mark Zuckerberg hedged the point, even as he sang his same familiar strategic tune of the last few years.

“The thing to take away isn’t that we don’t care [about business]. People for years were asking me why aren’t we trying to make more money,” he said. “I would say I’m trying to build a business for the long term, and it was clearly the right strategy.”

While shot-caller-in-chief Zuckerberg will be the one key voice in the IPO, the man to watch has and will be CFO David Ebersman.

The longtime Genentech executive, who came to Facebook in 2009, has been doing the heavy lifting in preparation for the IPO, sources said, and will continue to do so.

Some reports have estimated the company’s valuation could be more than $100 billion.

Facebook’s IPO will be the biggest of any tech company in history — six times that of Google’s, according to Accounting Degree Online.

The company itself is preparing to raise $10 billion this year, according to reports, to push the company’s public value to $100 billion. More than Disney ($61 billion), Amazon ($88.3 billion) and McDonald’s ($95.6 billion).

Facebook expects to reach the $10 billion excess profit by increasing revenue from advertising, Facebook fan pages and display ads.

Video Game Sales Decline

Video game sales failed to live up to high hopes in December, with total industry sales falling 21 percent to $3.99 billion from $5.07 billion a year ago.

For the year, game sales were $17.02 billion, down 8 percent from $18.59 billion a year ago, according to market researcher NPD Group.

The poor performance of video game sales in physical retail stores masks what’s really happening.

Gamers are shifting their purchases to online, social and mobile forms of gaming — dubbed digital gaming — while the retail side is shrinking fast.

The growth in digital isn’t quite big enough to offset the shrinking retail numbers.

In December, hardware sales were down 28 percent while software was down 14 percent.

Full told, the estimated total consumer spending on games includes physical video and retail games, used games, game rentals, subscriptions, full-game digital downloads, social network games, downloadable content, and mobile games. Not counting hardware, this had estimated sales of $16.3 to $16.6 billion in 2011, down about 2 percent or so from a year ago.

Hardware sales were down 11 percent for the year, as were accessories. Software was down 6 percent. New physical retail sales of portable, console and PC games were $9.3 billion in 2011, down 8 percent from $10.1 billion in 2010. Sales grew for used games, full-game digital downloads, downloadable content, and mobile gaming apps.

“Overall industry results are not entirely surprising given that we are on the back end of the current console lifecycle, combined with the continued digital evolution of gaming,” said Anita Frazier, analyst at the NPD Group. “Core gamers continue to be engaged and spend on established franchises across both the digital and physical format using multiple devices for different gaming occasions.”

Shed added, “Our overall estimate of the market continues to point toward the increased imperative for deeper visibility into digital distribution than is available today, not only in the U.S. but globally.”

NPD is working with research company EEDAR to try to come up with more accurate numbers for global digital and physical game sales worldwide.

For the full year, Call of Duty Modern Warfare 3 was the best-selling game, and it took the top honors in December. Just Dance 3 from Ubisoft was No. 2, followed by Elder Scrolls V: Skyrim from Bethesda Softworks, Battlefield 3 from Electronic Arts, and Madden NFL2012.

During the year, Microsoft said it sold 1.7 million Xbox 360 consoles in December and it was the top console seller in 2011. Microsoft also said it outside the second-place player by more than 2.7 million units. It captured about 49 percent of consumer retail spending at $6.7 billion in sales for 2011. Of that, $2.1 billion was spent on accessories such as Microsoft’s Kinect motion-sensing system.

Microsoft said it has sold 66 million Xbox 360s, has 40 million Xbox Live members, and has sold more than 18 million Kinect sensors. Microsoft said it ended the year with 40 percent share of the console hardware market.

Sony said it sold 6.5 million PlayStation 3 consoles in the holiday season.

Hostess Brands Snacks

Hostess Brands is hoping to cut its high costs as it heads back into bankruptcy protection for the second time in less than a decade.

Hostess has enough cash to keep stores stocked with its Ding Dongs, Ho Hos and other snacks for now as it battles rising labor costs and increased competition.

But longer term, the 87-year-old company has a bigger problem: health-conscious Americans favor yogurt and energy bars over the dessert cakes and white bread they devoured 30 years ago.

Last year, 36 percent of Americans ate white bread in their homes, down from 54 percent in 2000, according to NPD Group. Meanwhile, about 54 percent ate wheat bread, up from 43 percent in 2000.

Consumption of healthy snacks is growing, too. About 32 percent of Americans ate yogurt at least once in two weeks in 2011, for instance, up from 18 percent in 2000.

“We’re less likely to be snacking on items that we shouldn’t be snacking on,” said Harry Balzer, chief industry analyst for The NPD Group, a consumer marketing research firm.

Hostess, which is a privately held, doesn’t disclose sales figures. But Nyeyoka Bryan, 26, is proof that the company has lost at least some of its hardcore fans.

Bryan said she stopped eating Twinkies at about age 16 because she decided they were unhealthy. Still, the student who was sipping a fruit smoothie in the snack aisle of a Duane Reade store in New York on Wednesday afternoon said she’d be sad if Twinkies disappeared.

To be sure, Hostess’ snacks don’t neatly fit into the U.S. trend toward a healthier lifestyle that includes a diet rich in whole wheat foods, fruits and vegetables.

For instance, Twinkies, a snack cake with a mysterious cream filling that epitomizes empty calories, has 150 calories and 4.5 grams of fat. Meanwhile, a Ding Dong chocolate cake with filling has 368 calories and 19.4 grams of fat.

Hostess has introduced some healthier options in recent years, including 100-calorie packs of cupcakes and Twinkies. The company also is working on lowering sodium in some products. But those efforts haven’t helped the company’s junk-food status much.

“The iconic status of Twinkies is partly this perception that there’s nothing real in it,” said Ken Albala, professor of history at the University of the Pacific, in Stockton, Calif., who specializes in food history. “It’s this cake filled with an unidentifiable sugary cream filling that never goes bad.”

In Hostess’ Chapter 11 filing on Wednesday, the company said its rivals have combined and expanded their reach, heightening competition in the snack space. Hostess’ competitors range from Bimbo Bakeries, which makes Entenmann’s baked goods, and McKee Foods, which make Little Debbie snack cakes. It also faces competition from larger food makers like Sara Lee and Kraft Inc.

Additionally, Hostess employees are unionized while most of its competitors aren’t. As a result, Hostess has high pension and medical benefit costs. The company has 19,000 employees and operates in 48 states.

Hostess did not announce layoffs but spokesman Lance Ignon said Wednesday that the company will make future decisions “in the best interest of the company.”

CEO Brian Driscoll said Hostess is working to reach a consensual agreement with its unions to modify its collective bargaining agreements. Hostess also hopes to modernize its systems, fleets and plants to keep pace with customer needs.

“This company has tremendous potential if we can remove the barriers to success,” Driscoll said.

The Teamsters Union, which represents about 7,500 of Hostess’ delivery drivers and merchandisers, said in a statement on Wednesday that it is also committed to working toward a solution.

The company’s filing comes nearly three years after its predecessor emerged from bankruptcy proceedings. That company, called Interstate Bakeries and based in Kansas City, Mo., filed for bankruptcy protection in 2004 and changed its name to Hostess Brands after it emerged in 2009.

Hostess said Wednesday that its previous efforts to change, including the prior Chapter 11, were insufficient. Under its most recent bankruptcy filing, it is looking to restructure into a “strong, competitive” company.

In its filing with the U.S. Bankruptcy Court for the Southern District of New York, Hostess listed about $860 million in debt. The company’s biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund, which it owes about $944.2 million.

In the filing, Hostess also listed its estimated assets between $500 million and $1 billion and its estimated liabilities at more than $1 billion.

The Irving, Texas-based company said that it will be able to maintain routine operations thanks to a $75 million financing commitment from a group of lenders led by Silver Point Capital LP.

Coors Light No. 2 Beer In U.S.

Coors Light surpassed Budweiser in 2011 to become the country’s No. 2-selling beer, according to the trade publication Beer Marketer’s Insights.

The milestone, which has been widely anticipated for more than a year, is the result of years of declines by Budweiser. 

Budweiser is the only full-calorie beer in the top five U.S. beers, according to data from Symphony IRI, a Chicago-based market research firm.

Bud Light is the top-selling beer by a sizable margin.

Miller Lite is fourth, with Natural Light rounding out the top five, according to SymphonyIRI data for the 52 weeks which ended October 21.

Coors Light, which is handled by Chicago-based Miller Coors, has meantime been posting slow but steady growth.

“Dethroning the King is a great accomplishment so early in the history of MillerCoors,” a MillerCoors spokesman wrote in an email.

“We will be appropriately celebrating this achievement with our employees and distributors who have worked so hard to deliver an impressive 7 consecutive years of growth on Coors Light and then getting back to work to deliver an 8th consecutive year of growth.”

According to Beer Marketer’s Insights, Coors Light sales grew 0.8 percent, to 18.3 million barrels in 2011, while Budweiser sales declined 4.6 percent to 17.7 million barrels.

The data includes Puerto Rico and exports.

Coors was first produced in 1978.

The beer has a “Cold Certified” label which turns the mountains on the label from white to blue when the beer’s temperature is lowered to 4 degrees Celsius (39 degrees Fahrenheit).

In 2008, Coors Light became the official beer of NASCAR, replacing Budweiser.

In 2009, a Coors Light koozie depicting scenes from the 2010 Winter Olympics was offered in a limited number of cases that contained 28 bottles instead of 24.

Also in 2009, the Hillside Chalet Contest was created. The winner was given a six-night stay in Whistler, British Columbia, during the 2010 Winter Olympics.

Air Jordan II Retro Concord

The release of Nike’s new Air Jordan basketball shoes are causing a crazy frenzy at stores across the United States early Friday.

Police using pepper spray on a group of rowdy customers near Seattle and officers arresting some shoppers after a crowd broke down a door in suburban Atlanta.

A group of about 20 people were sprayed after getting into fights at the Westfield Southcenter mall in suburban Seattle, Tukwila Officer Mike Murphy said.

The crowd started gathering around midnight at four stores in the mall and had grown to more than 1,000 by 4 a.m., when the stores opened, Murphy said.

“Around 3 (a.m.) there started to be some fighting and pushing among the customers,” he said. “Around 4, it started to get pretty unruly and officers sprayed pepper spray on a few people who were fighting, and that seemed to do the trick to break them up.”

No injuries were reported, although some people suffered cuts or scrapes from fights, Murphy said. The crowd broke off a door.

One man was arrested for assault after authorities say he pushed an officer.

“He did not get his shoes; he went to jail,” Murphy said.

About 25 officers from Tukwila, Renton, Kent, Seattle and King County responded. They smelled marijuana and found alcohol containers at the scene, he said.

Murphy said the crowd was on the verge of a riot and would have gotten even more out of hand if the police hadn’t intervened.

“It was not a nice orderly group of shoppers,” he said. “There were a lot of hostile and disorderly people.”

The stores sold out of the Air Jordan 11 Retro Concords, and all but about 50 people got their Nikes.

Hundreds of customers also lined up outside shoe stores in downtown Seattle and at a mall in Federal Way.

Across the country, at least four people were arrested in a mad dash by customers hoping to buy the shoes at a suburban Atlanta mall.

DeKalb County police told Fox 5 Atlanta that up to 20 squad cars responded to a mall in Lithonia early Friday. They said a large crowd broke down a door to get inside before a store opened.

Police said they escorted most of the people outside but took four into custody.

Officers said they had to break a car window to get two toddlers out after a woman went in after the shoes. They said she was taken into custody when she returned to the car.