CAT Letting Us Down Easy? Opaque Guidance Cuts At CAT’s Analyst Meeting

Takeaway: $CAT cut 2012 and 2015 guidance without a lot of specifics. Management may be trying to lower expectations into 3Q results and guidance.


 Letting Us Down Easy:  Opaque Guidance Cuts At CAT’s Analyst Meeting

  • 2012 Guidance Cut?:  Management hinted that 2012 sales would "come off" by about $2 billion.  That is not positive for 3Q and 4Q sales and EPS.  This feels like management is trying to lower expectations gradually so 3Q earnings and guidance are not too surprising.  We will be watching to see if consensus estimates come down for 2H 2012 and 2013.
  • 2015 Guidance Cut: We are not sure that a guidance outlook into 2015 is particularly relevant, but it does appear that CAT is trying to lower expectations.  Management insisted that the cut from $15-$20 in 2015 EPS to $12-$18 in 2015 EPS was not a guidance cut.  We do not yet follow that logic, but note that the range is wider.
  • Expecting a Downturn? CAT seems to be expecting an end market downturn and seemed to feel defensive about being prepared for it. Aside from excess inventories and recently added capacity, I guess CAT is “prepared.”
  • “The Company Is In Cyclical Businesses”:  CAT’s cyclicality is a key part of our thesis, which is that you shouldn’t buy cyclical companies at peak margins and sales.  Mining capital spending should be a cyclical, sub-GDP growth industry.
  • Chinese Construction Off 40%: That is not a number I have heard before, but it is pretty spectacular and is consistent with what we have seen in Chinese construction materials prices.
  • CAT Overview: Please see our more detailed review of CAT in our Black Book and Conference call at CAT’s Deep Cycle and Flash CAT Call Replay.

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more