Caterpillar Inc reported a stronger-than-expected quarterly profit on Monday and raised its full-year sales forecast above Wall Street estimates, citing an improving global economy, especially in Asia and Latin America.

The world's largest maker of earth-moving equipment, whose shares rose as much as 5.9 percent, said it was seeing particularly robust orders from mining and energy companies.

A rebound in most metal prices resulted in firm orders for much of the company's available 2010 production of large mining trucks and large track-type tractors, Caterpillar said. Some of its largest mining vehicles are sold out for the year, and it is now taking orders for delivery in 2011.

Economic conditions are definitely improving, particularly in the world's developing economies, Caterpillar said in a statement. Industry activity and orders are significantly higher than last year and are at record levels in some areas.

But the company cut its outlook for 2010 U.S. housing starts by 20 percent -- from 1 million to 800,000 -- saying the weak labor market was the major reason that many remain pessimistic about the U.S. economy.

The volume is beginning to come back, said Longbow Securities analyst Eli Lustgarten. But it's all outside the United States.

Peoria, Illinois-based Caterpillar reported a first-quarter net profit of $233 million, or 36 cents a share, compared with a year-earlier loss of $112 million, or 19 cents a share.

Stripping out one-time charges, including tax expenses of $90 million related to the recently signed U.S. health care legislation, earnings were 50 cents a share.

On that basis, analysts on average expected profit of 39 cents a share, according to Thomson Reuters I/B/E/S.

Sales, including revenue from Caterpillar's financial service arm, fell 11 percent to $8.23 billion, pulled down by a 28 percent decline in its engine and turbine business. Analysts had forecast $8.84 billion.

Despite the lighter-than-expected sales, Caterpillar managed to beat earnings expectations because of lower manufacturing costs and strong pricing.

The company said its manufacturing costs fell $566 million during the quarter because of lower labor, overhead, warranty and material expenses.

It said it now expected a full-year profit of $2.50 to $3.25 a share on sales of $38 billion to $42 billion. The analysts' average estimates are profit of $2.69 a share and sales of $37 billion.

Caterpillar, which laid off nearly 30,000 full-time and contract workers worldwide during the recent downturn, said it had begun adding to its payrolls again.

It said it had hired 1,500 workers worldwide in the first quarter, most of them outside the United States.

Currently, we are seeing faster recovery in Asia/Pacific and Latin America, the company said. So, prospects for employment increases in 2010 are best for facilities in those regions.

Shares of Caterpillar were up 5.4 percent at $72.48 in morning New York Stock Exchange trading after rising as high as $72.83.

The results released on Monday essentially mark the end of the Jim Owens era at Caterpillar.

Owens, 64, will step down as chief executive officer at the company's June board meeting, ending a career that began in 1972, when he joined Caterpillar while he was still finishing work on his PhD in economics at North Carolina State University.

The next time Caterpillar reports earnings, it will be under new CEO Doug Oberhelman, 56. Like Owens, Oberhelman, who oversees engines and turbines at Caterpillar, is a lifelong company employee.

He joined Caterpillar in 1975, worked in South America and Asia, and was chief finance officer between 1995 and 1998 -- a position that Owens also held.

During Owens' first five years at Caterpillar's helm, sales of the company's iconic yellow construction and mining equipment, and diesel and turbine engines, rose 70 percent to $51.3 billion, and earnings per share and dividends both doubled.

But the company was walloped by the economic downturn, and sales last year shrank to just $32.4 billion -- right about where they were when Owens was named CEO.

(Reporting by James B. Kelleher, editing by Dave Zimmerman, Derek Caney and Lisa Von Ahn)

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