How things have turned.

After yesterday's strong earnings report, Goldman reiterates a BUY rating on construction company Caterpillar.

Why? In part due to "exposure to accelerating US construction capex".

That's right: US exposure. When was the last time you heard that?

The key points

We raise our 2012-13 EPS by an average of 10% to $10.10/ $11.95 due to a sharper US construction equipment recovery, lower pension, and share gains in Europe and Asia construction equipment markets.

4Q takeaways:

(1) N America construction equipment recovery is accelerating, with United Rentals increasing capex by 30% in 2012, URI and RSC increasing pricing by over 5% in 2012, and CAT delivering 50% higher 4Q retail sales. (2) Emerging recovery in locomotive capex, with EMD sales up 37% in 4Q and 15% above our estimate. Our rail capex survey points to a doubling in US locomotive sales and a 40% increase in EMD globally in 2012. (3) Strong cost control, as CAT confirmed a $350 mn cut in incentive comp and guided to flat pension expense vs our +$140 mn estimate. (4) Consistent operating performance, with adherence to 90-day build schedules still in the mid-90% range.

This is a theme of the year. As we noted from Japan's trade data earlier, the US is the world's shining pillar of strength.

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