Caterpillar Inc.'s third-quarter profit fell 53%, but the company said it likely has seen the bottom in sales as dealers have slashed inventories during the economic downturn.
The heavy-equipment maker's earnings results also blew past Wall Street expectations. Caterpillar shares jumped 5.2% to $60.88 in premarket trading Tuesday.
A Caterpillar earthmover works in the quarry area of the Lucky Cement plant in Karachi, Pakistan.
"We are pleased with this quarter's profit given the severe economic environment and with our sales well below end-user demand as dealers continue to aggressively draw down inventories," said Chairman and Chief Executive Jim Owens.
The economic downturn and sliding demand for construction have sapped sales for Caterpillar, which makes heavy machines used for digging and building. The company said last month that world-wide machinery sales through retailers for the three months to close out August declined nearly half.
Caterpillar has said it expected the third quarter would be its weakest of the year as dealers hold off ordering new equipment, and the company anticipated job cutting and factory shutdowns to curb production.
The company reported earnings of $404 million, or 64 cents a share, down from $868 million, or $1.39 a share, a year earlier. Revenue fell to $7.3 billion from a record-high $12.98 billion a year earlier.
Analysts had forecast earnings of six cents a share on $7.48 billion in sales.
Gross margin rose to 28% from 25.2% on cost-cutting.
"We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s," Mr. Owens said. "We are seeing encouraging signs that indicate a recovery may be underway."
The company said its machinery sales decreased 52%, and engine sales slid 35%.
Write to Nathan Becker at nathan.becker@dowjones.com
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