Caterpillar (CAT) is down -2% today after reporting weak earnings and lowering 2016 guidance. “Economic weakness throughout much of the world persist and, as a result, most of our end markets remain challenged,” Caterpillar Chairman and CEO Doug Oberhelman said.
Here’s a look at CAT’s updated guidance:
- 2016 Sales: $39 billion versus $40 to $40.5 billion previously forecast
- 2016 EPS: $3.25 vs. previous guide of $3.55
Stay short CAT? You bet.
Hedgeye Industrials analyst Jay Van Sciver hosted a conference call with institutional investors last week to discuss his short thesis. In the excerpt above, Van Sciver gives an overview of his CAT call. “In early 2015, the company went into fantasy mode, using its balance sheet and various change in accounting to improve its results,” Van Sciver says. “You don’t short companies that manufacture their own numbers.”
That’s one of the reasons he took the company off his Best Idea short list until late this Summer. “I was waiting for a bounce back and now, heading into earnings, we have an important catalyst in management change. That’s not a sign something great is coming.”
The outlook isn’t getting better. Stick with the short here.
