CAT Results: This Is A Recovery?

July 21, 2009 at 3:09 pm  ·  Category: Macro Economics, Market Commentary, Stocks

Heavy machinery maker Caterpillar (CAT) reported earnings this morning before the open.  We all know the stuff they make.  As such, they are a terrific bellwether for capital spending.

They earned 72 cents a share, excluding redundancy costs, on revenue of $8.0 billion.  That compares to earnings of $1.74 on revenues of $13.6 billion in the year ago quarter.  Revenues were off 41% and 44% in their core machinery and engines segment.  EPS beat estimates of 22 cents a share on heavy cost cutting. 

They raised their full year 2009 EPS outlook to between $1.15 and $2.25 a share from $1.25 they gave in their first quarter report.  At today’s close of $39.46, the midpoint of that range represents a 23 forward multiple.

The stock was off to the races today, up 7.7% on heavy volume.

But, seriously, is this kind of report really indicative of an economic recovery????  A 43% drop in machinery and engines sales shows recovery or stabilization???

We’ve seen this before: groupthink in the stock market with everybody buying into the premise of recovery until finally the facts intrude and end the party.

cat-ytd-chart

Disclosure: Top Gun has no position in Caterpillar (CAT) shares.

Posted by Greg Feirman  ·  Trackback URL  ·  Link
 

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