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