In a recent regulatory filing, Caterpillar Inc. (CAT)  announced its plans to increase prices by up to 2% worldwide on most of its  machinery effective January 2010. The company attributed this price increase to current industry factors and current and expected general  economic conditions.

This indicates the company’s optimism about demand improvement next year.  Caterpillar had earlier indicated that there was already an improvement in  industrial production growth and increase in commercial and residential  building sales in China. The company stated that the country’s economic  growth has rebounded in the second quarter. Caterpillar believes that the government stimulus package, along with the reduced interest rates, will drive the Chinese economic growth.

Apart from China, Caterpillar sees demand potential for its products in  other developing as well as developed countries. Given the need for basic  infrastructure globally, Caterpillar is confident of capitalizing on the economic recovery. Being a market leader in construction and mining  equipment, we believe Caterpillar will benefit immensely from the growing  need for infrastructure development around the world.

Though the company has been witnessing declining volumes in all the geographic markets in the recent quarters, we expect strong activity levels  in most of the company’s end-markets such as heavy construction, oil &  gas, mining, electric power and marine applications, to drive volume  growth over the long term. With its strong brand name, pricing power, focus on R&D and global dealer network, we believe Caterpillar is well  positioned to take advantage of the growth opportunities in these markets.

Zacks Investment Research
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