Tuesday, October 20, 2009

Caterpillar Reports; Not Much New

Caterpillar reported quarterly results this morning. I like to keep an eye on companies like Cat due to their cyclical nature and I feel they can give us a tell on if the economy is improving. They beat estimates, which were laughable. Sales and profits are still substantially down, and they are selling the hope, just like many others. Here are some quotes from the Bloomberg article.

“We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s,” Owens said in the statement. “We are seeing encouraging signs that indicate a recovery may be under way.”

The company narrowed its 2009 forecast range to $1.85 to $2.05 a share, from $1.15 to $2.25. The average estimate was $1.48 a share and the highest prediction was $1.75. The revenue forecast is now $32 billion to $33 billion, compared with its previous forecast of $32 billion to $36 billion.

“The world economy is still facing significant challenges,” Owens said in today’s statement. “There is uncertainty about the timing and strength of recovery.”

“We’ve already started planning for an upturn,” Owens said in the statement. “When it comes, it can come quickly, and we, our dealers and our suppliers will be prepared.”

In a preliminary forecast, Caterpillar today predicted 2010 sales would increase 10 percent to 25 percent from the midpoint of the 2009 forecast range, partly driven by the end of dealer inventory reductions.

As I've said before many times, and will continue to say, selling the hope is okay. The economy may have bottomed. But Wall Street has been buying the hope big time since late spring. Now stocks are just too expensive and have fully priced in a recovery which has yet to appear. That's why its dangerous to just "buy stocks", which is my term for just jumping back in. I still think there are deals out there, but large cap stocks have just been bid up too high in my opinion.



TraderMark said...

just like last quarter
tons of tax stuff
tons of inventory stuff

I think they did like 20 cents without all that jazz, instead of "64" or whatever they reported

but I said the same thing last quarter and the stock has only gone up

cutting 34,000 workers is a great thing

Michael said...

Yep. This pattern in itself is becoming a bubble. As we've said before, it appears it can only last so long, but with infinite stimulus, they're looking to keep everything floating until the economy actually responds. When companies report that they're hiring workers again, you can convince me the economy is improving. Until then, its just fuzzy math. Thanks for the comment Mark!