Jan. 26 (Bloomberg) -- Caterpillar Inc., the world's largest maker of earthmoving equipment, said fourth-quarter profit rose 4.3 percent on increased sales in China and India.

Net income climbed to $882 million, or $1.32 a share, from $846 million, or $1.20, a year earlier, the Peoria, Illinois- based company said today in a statement. Sales gained 14 percent to $11 billion, beating analysts' estimates.

Machinery revenue rose 13 percent as demand from Asia, Latin America and the Middle East countered a drop in North America. Caterpillar, which cut its sales forecast for 2006 in October, left unchanged its projection for sales growth this year. That might give investors confidence, said Prudential Equity Group Inc.'s Igor Maryasis.

``Virtually every market outside the U.S. is doing well for Cat,'' said Maryasis, an analyst at Prudential in New York. He called Caterpillar's October forecast ``incredibly conservative.'' Maryasis has an ``overweight'' rating on the shares and doesn't own any.

Shares of Caterpillar rose $1.46, or 2.5 percent, to $61.09 at 4:02 p.m. in New York Stock Exchange composite trading and gained 6.2 percent last year.

Fourth-quarter earnings missed the $1.35 average estimate of 13 analysts surveyed by Bloomberg. The average sales estimate was $10.4 billion.

2007 Forecast

Caterpillar is winning sales in China and India, the two fastest growing economies in the world, with more than 2.3 billion people and booming construction and road building.

Revenue for 2007 will be $41.5 billion to $43.6 billion, the company said. Sales last year rose 14 percent to $41.5 million. Analysts, on average, estimate 2007 sales will be $41 billion.

Profit will rise to $5.20 to $5.70 a share next year from $5.17 in 2006, Caterpillar said. On-highway truck engine and U.S. housing demand will drop sharply this year, shaving about $200 million from first-quarter operating profit, the company said. The company plans to focus on managing costs to increase profit.

Thirteen analysts surveyed by Bloomberg estimate 2007 profit will be $5.53 a share.

Operating costs climbed $322 million in the quarter. About $153 million of that came from increased manufacturing expenses, including higher costs for raw materials, the company said. Research and development and general costs rose $169 million.

Machinery Sales

Machinery sales in North America declined 1 percent. Revenue in Europe, Africa and the Middle East increased 42 percent. Latin America jumped 39 percent and Asian revenue increased 9 percent.

The perceived risk of owning Caterpillar's bonds was little changed. Credit-default swaps based on $10 million of its bonds fell to $13,400 from $13,500, according to CMA Datavision in London. A decline suggests improvement in the perception of credit quality.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt.

Caterpillar is a bellwether of the U.S. economy because its sales span industries from mining to oil to construction, making orders dependent on both consumers and corporate spending.

Caterpillar, which gets more than half its sales in the U.S., benefited last year as companies bought trucks in advance to avoid 2007 emissions changes that make vehicles more costly.

Over the past two years, plants ran at full capacity to meet demand, particularly for mining equipment, as countries such as India and China bought more machines.

Caterpillar's 2006 profit rose 24 percent to $3.54 billion.

The company has forecast sales of more than $50 billion in 2010 and per-share profit will rise 15 percent to 20 percent through that year. Earnings may be $8.13 to $10.05 a share in 2010, Owens said at the company's investor meeting on Nov. 3.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net; Carol Wolf in Cleveland at cwolf@bloomberg.net.

Last Updated: January 26, 2007 17:29 EST