Cleveland Research analyst Adam Uhlman is keeping his Neutral rating on Caterpillar with a positive outlook for the company. Uhlman says that the dealer feedback from Europe suggests the company and its peers are raising their build rates this year and now sees demand rising about 10% vs. prior survey-driven forecast of mid-single-digits. The analyst also points to surveys from Asia suggesting "accelerating demand across mining, construction equipment, aftermarket, and power generation". Uhlman adds that the price increases of 1%-3% in January across Asia and Europe was met with little resistance from end users.
The major averages are drifting near record levels as investors digest another heavy dose of earnings reports as well as a rare bidding war in the energy sector. ECONOMIC EVENTS: In... To see the rest of the story go to thefly.com. See Story Here
DEAL NEWS: Andarko (APC), up 11% after Occidental Petroleum (OXY) announced that it has made what it called "a superior proposal" to acquire Anadarko for $76 per share, in which Anadarko shareholders would receive $38.00 in cash and 0.6094 shares of Occidental common stock for each share of Anadarko common stock. Occidental Petroleum is down 5% after the bid news, while Chevron, which has an existing agreement in place to buy Anadarko for $65 per share in cash and stock, is down fractionally. UP AFTER EARNINGS: Boeing (BA), up 1%... General Dynamics (GD), up 3%... Stanley Black & Decker (SWK), up 4%... Domino's Pizza (DPZ), up 6%. DOWN AFTER EARNINGS: AT&T (T), down 4%... Boston Scientific (BSX), down 5%... Sirius XM (SIRI), down 3%... Caterpillar (CAT), down 2.5%.
Cat Financial reported first-quarter 2019 revenues of $736M, an increase of $46M, or 7%, compared with the first quarter of 2018. First-quarter 2019 profit was $98M, a $7M, or 8%, increase from the first quarter of 2018. The increase in revenues was primarily due to a $33M favorable impact from higher average financing rates and a $19M favorable impact from higher average earning assets, partially offset by an $8M unfavorable impact from returned or repossessed equipment. Profit before income taxes was $142M for the first quarter of 2019, compared with $124M for the first quarter of 2018. During the first quarter of 2019, retail new business volume was $2.35B, a decrease of $190M, or 7%, from the first quarter of 2018. The decrease was primarily driven by lower volume in North America and Asia/Pacific. "Our portfolio and business performed well despite some remaining challenges in the Cat Power Finance portfolio," said Dave Walton, president of Cat Financial and vice president of the Financial Products Division of Caterpillar Inc. "With relentless focus on expanding our ability to serve customers globally through financial services solutions, we remain well-positioned to serve the needs of Caterpillar, Cat dealers and our growing customer base worldwide."
Sees "modest" y/y sales increase in 2019. Sees price realization offsetting higher costs. Sees about $500M lower y/y short-term incentive compensation expense. Sees FY19 restructuring costs about $100M-$200M. Sees FY tax rate of 26%, CapEx of $1.3B-$1.5B. Comments taken from slides being presented on the Q1 earnings conference call.
Caterpillar said at the end of the first quarter of 2019, the order backlog was $16.9B, about $300M higher than the fourth quarter of 2018. The increase was in Construction Industries and Energy & Transportation, partially offset by a decrease in Resource Industries due to higher dealer inventories.
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.