March 11 (Bloomberg) -- Caterpillar Inc., the world's largest maker of bulldozers and excavators, raised its sales forecast for 2010 by 20 percent to $60 billion, exceeding analysts' estimates. Caterpillar stock rose in late trading.

The sales forecast was boosted from $50 billion and represents a 33 percent jump from last year. Caterpillar, which released the outlook today at a meeting in Las Vegas, kept its profit prediction of $8 to $10 a share in the next two years. The average of five analyst estimates compiled by Bloomberg was for 2010 earnings of $7.67 a share on revenue of $52.9 billion.

Caterpillar said it will benefit from machinery sales in emerging markets and efforts to improve public works in North America and Europe. Caterpillar has almost doubled sales since 2003 on demand from markets such as China, Russia and South Africa. The Peoria, Illinois-based company plans to spend $2.3 billion to add capacity and has trimmed costs to boost profit.

``We've got crumbling bridges and roads here in North America, and we're going to have to spend significantly to fix that,'' Chief Executive Officer Jim Owens told analysts and investors at the meeting. ``The same is true of Western Europe. The emerging markets are building from the ground up.''

Caterpillar rose to $74.50 as of 6:33 p.m. in New York, up $1.89 from the end of regular New York Stock Exchange trading for an 8.4 percent increase since yesterday's close. U.S. stock markets rose the most in five years today after the Federal Reserve said it will pump $200 billion into the financial system to shore up banks battered by mortgage-related losses.

Profit Forecast

Owens said Caterpillar's investment in adding capacity and developing new products will cut into profitability, prompting him to leave the earnings per share forecast unchanged. Caterpillar plans to spend $2.3 billion to expand production, particularly overseas, he said.

``It's a positive sign that they reiterated the forecast for 2010, but the market is in disbelief'' Caterpillar will reach profit of $8 to $10 a share, said Eli Lustgarten, an analyst with Longbow Research in Independence, Ohio. He has a ``buy'' rating on the stock. ``There's a big level of spending in there.''

The U.S. will likely undergo a ``shallow recessionary period'' this year, Caterpillar said today. The deepest U.S. housing slump in more than a decade contributed to an 11 percent drop in North American machinery sales last year. Owens expects the housing market to bottom out in this year and said 2008 gross domestic product may rise 1.1 percent in North America.

`Shallow Recession'

Caterpillar first noted the possibility of recession on Oct. 19 and cut its 2007 forecast. The stock fell 5.3 percent, adding to a 2.6 percent drop in the Standard & Poor's 500 Index. In January, Caterpillar said recession was ``a definite threat.''

The company predicted global economic growth of 3.1 percent this year as the Asia Pacific region gains 7.5 percent, more than twice the 3 percent rate projected for Europe, Africa and the Middle East.

Caterpillar plans to develop engines to meet emissions regulations slated for 2011 using particulate filters. The company has been losing market share in heavy-duty truck engines as standards on carbon emissions become tougher, and Caterpillar has said it is reviewing strategic options for the unit. Owens said the business won't have an impact on the profit forecast.

``We know we need to do more to ramp up our investment in development to get ahead of the curve on this,'' Owens said today. He plans to raise research spending across the company as much as 20 percent this year.

The machinery maker has been working to reign in raw material costs, which have risen about 1.5 percent a year in the past five years, Owens said. Prices of crude oil, coal, natural gas and copper have already topped the company's forecasts for this year, he said.

To contact the reporter on this story: Courtney Dentch in New York at cdentch1@bloomberg.net.

Last Updated: March 11, 2008 21:26 EDT