Fly Intel: What to watch in Caterpillar earnings report

Caterpillar (CAT) is scheduled to report results of its fiscal first quarter before the market opens on Wednesday, April 24, with a conference call scheduled for 11:00 am ET. What to watch for: 1. GUIDANCE: When Caterpillar reported its fourth quarter results on January 28, the company provided FY19 earnings per share guidance of $11.75-$12.75, against consensus estimates of $12.64, at that time. During the Q4 earnings conference call, management noted that FY19 EPS outlook includes tailwinds of lower short-term incentive compensation expense, favorable price realization, Financial Products profit, and share repurchase. The FY19 outlook also includes headwinds of higher costs, a 26% tax rate, and a normalized level of restructuring costs. The company has not updated their guidance since and analyst expectations for FY19 EPS currently sit at $12.30. 2. RETAIL MACHINES SALES: On March 13, Caterpillar reported in a regulatory filing that its total retail machines sales were up 7% on a three month rolling basis in February. For reference, retail sales of machines were up 9% in the period ending in January and up 10% in the period ending in December. The company reported world Resources Industries sales were up 7% in the February-end period, compared to a January-end period increase of 17%. Construction Industries world sales were up 8% in the February-end period, versus a 7% increase in the prior three-month period ending in January. Total Energy & Transportation Retail Sales were down 1% in the February-end period, down from the 8% growth in the January-end period. 3. CATERPILLAR DOWNGRADED TO HOLD: On April 3, Deutsche Bank analyst Chad Dillard downgraded Caterpillar to Hold from Buy and lowered his price target for the shares to $128 from $152. biggest risk to the bull case for Caterpillar is if its backlog growth turns negative, "and it is becoming increasingly clear that it will within this next quarter," Dillard wrote in a research note. Negative backlog growth historically precedes a negative earnings revision cycle by three months, the analyst points out. He notes that consensus estimates during these cycles typically get cut by 45% and the shares fall by 40% from the peak. Synchronized global growth "has collapsed," the China Land Cycle is "rolling over" and will continue to weaken, Europe is slowing more than expected and the U.S. is "oversaturated with construction equipment," according to Dillard. 4. QUARTERLY DIVIDEND MAINTAINED: On April 10, the Caterpillar board voted to maintain the quarterly cash dividend of 86c per share of common stock, the company announced.