Caterpillar Inc reported stronger-than-expected quarterly earnings on Tuesday and raised its full-year forecast, hailing what it said were growing signs of a global economic rebound and sending its shares up more than 4 percent.

The company, the world's largest maker of earth-moving equipment, also gave investors a first glimpse of 2010, saying it expects sales next year to rise 10 percent to 25 percent from this year's range of $32 billion to $33 billion.

We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s, Chief Executive Officer Jim Owens said in a statement.

We are seeing encouraging signs that indicate a recovery may be underway.

The past year has been a tough one for Caterpillar as sales fell at their steepest rate since the Great Depression and the company was forced to cut 34,000 full-time and contract workers globally.

Just three months ago, Caterpillar said it might report a third-quarter loss because of production cuts and falling sales. Instead it reported a profit and said order inquiries from key customers, including miners, were on the rise again after all but evaporating last fall in the wake of the worldwide credit crisis.

The results were very impressive and certainly suggest CAT is likely through the worst of the downturn. said John Kearney, senior research analyst at Cedar Hill Associates.

Bank of America-Merrill Lynch analyst Andrew Obin said some of the third-quarter beat came from a tax benefit. But even discounting that, he added, the results were meaningfully better than estimates.

IMPROVING CONDITIONS

Caterpillar, a closely watched component of the Dow Jones industrial average, said third-quarter net profit fell to $404 million, or 64 cents a share, from $868 million, or $1.39 a share, a year earlier.

Analysts on average had expected the Peoria, Illinois-based company to report a profit of just 6 cents a share, according to Thomson Reuters I/B/E/S.

Revenue dropped 44 percent to $7.29 billion, missing analysts' estimates of $7.47 billion.

Caterpillar raised its full-year profit forecast to a range of $1.10 to $1.30 a share, including costs for job cuts. That compares with its previous estimate of about 95 cents a share.

The just-ended quarter was a tough one, but Caterpillar said it believed it marked the low point for revenue.

While we are still navigating through a very difficult environment in 2009, we see signs of improving economic conditions throughout most of the world, Owens said.

Worldwide sales of Caterpillar's earth-moving equipment fell 52 percent to $3.9 billion during the quarter, while sales of its diesel engines and turbines fell 35 percent to $2.68 billion.

The credit crunch and the hardship it left in its wake are not completely over, Caterpillar said. Operating profit from financial products fell 36 percent, pulled down in part by provisions for credit losses and lower values on repossessed or returned equipment.

During the quarter, past due amounts rose to 5.79 percent from 5.53 percent at the end of the second quarter and 3.64 percent a year earlier. We expect that there will be continued pressure on past dues during the remainder of 2009, Caterpillar said.

Caterpillar shares were up 4.1 percent at $60.24 after earlier rising to $61.21 -- a 52-week high and nearly triple their level back in March.

(Reporting by James B. Kelleher, editing by Maureen Bavdek and Lisa Von Ahn)

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