Heavy equipment manufacturer Caterpillar Inc. executed a two-for-one stock split on July 13, after its pre-split price closed just under $100 that afternoon. The Peoria, Ill.-based company also raised dividends by 22%.

The adjustments reflect Cat's positive outlook for the rebounding equipment business. Chairman Jim Owens says, "we haven't yet reached our full potential."

Over the last year, Wall Street analysts have hammered manufacturing stocks, complaining that machine prices are too low to offset higher raw-material costs.

But that attitude is changing as price increases hit the balance sheet. "We believe better raw material comps and pricing will start making a significant positive impact" in the second half of the year, says Merrill Lynch analyst Andrew Obin.

He is more optimistic than others, forecasting a second-quarter revenue of $8.8 billion when Cat releases its next earnings report on July 21. The estimate "is supported by Cat's latest dealer retail statistics and continuing positive momentum in the company's key end markets, in particular U.S. non-residential construction," Obin says.

Contractors and rental companies are buying more machines again. New orders climbed 6.2% in April and another 7% in May, after slipping 8.6% in March. Compared with last year, orders are up 18% overall, according to the U.S. Dept. of Commerce.

Caterpillar, a $30-billion-a-year company and the world's largest construction equipment producer, recently announced more global expansion plans. Late last month, it reached a two-step agreement to acquire Eurenov S.A., a French remanufacturer. Full ownership is expected in 2007.

Cat executives say the deal will help Cat Remanufacturing Services, also known as "Cat Reman," sell to companies in related industries, such as automotive producers.

In addition to the stock split, Cat plans to distribute a 25� quarterly dividend on August 19, for shareholders of record as of June 22. The post-split payment, up 4.5� per share, is the largest increase in Cat's 80-year history.

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