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Importance of Caterpillar (CAT)

01/26/2012

I often refer to the earnings, guidance, and management commentary from Caterpillar (CAT) as a critical indicator for potential global growth. CAT is a global leader in the production of construction and mining equipment. Its revenue derivation is geographically well diversified:  North America (38%), Asia/Pacific (24%), Europe/Africa/Middle East (23%), and Latin America (14%).
 
This morning, CAT reported earnings of $2.32 a share – well ahead of the Street estimate for $1.73. Guidance for 2012 was $9.25 per share, ahead of the Street’s $9.10. These earnings suggest resilient demand, from emerging economies, in particular, for equipment related to copper, coal, and iron ore production. Capital expenditure was forecast to rise 15% on Joy Global’s conference call earlier this week.  
 
Highlight’s from CAT’s conference call:
 
•  Forecasts global GDP +3.3% for 2012
•  Forecasts China GDP above 8.5% in 2012
•  Forecasts weak/possible negative growth in the eurozone for two quarters
•  CFO highlighted what I believe will be a constant theme for all companies in 2012, “focused on keeping costs down”
•  CAT is installing dealers to sell a wide product range in China
•  December 3 month rolling sales worldwide +30%
 
 
Caterpillar (CAT) Weekly Chart, January 2009 to Present

Source: Bloomberg

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