STOCKS
Lower guidance from Caterpillar just adds to market worries about earnings and revenue growth
10/22/2012 6:16 pm EST•2 min read
Caterpillar’s post-earnings conference call this morning did nothing for a market spooked on earnings bad news from stalwarts like IBM (IBM), General Electric (GE), and McDonald’s (MCD) last week.
After lowering guidance last month, Caterpillar (CAT) did manage to beat Wall Street earnings expectations for the third quarter. After adjusting for changes in tax rates and a one-time gain on a sale of a majority interest in the company’s logistics business, earnings of $2.33 a share were above Wall Street projections of $2.22 a share. Revenue, however, came in short of Wall Street forecasts of $16.79 billion at $16.45 billion.
But it was the lowered guidance for 2012 and a flat preliminary forecast for 2013 that hit the market’s worry zone. Caterpillar lowered its 2012 guidance to $9.00 to $9.25 a share from the previous $9.60. The Wall Street consensus had been at $9.41. That works out to fourth quarter earnings of just $1.70 a share, well below the Wall Street consensus at $2.31. The company now projects revenue for 2012 at $66 billion, down from the previous range of $68 billion to $70 billion. For 2013 the company told Wall Street to expect revenue in a range of plus or minus 5% growth. If you think of that as a projection for essentially flat growth, it is significantly below the current Wall Street consensus of 5% growth in 2013. Caterpillar also said it expects the first half of 2013 to be weaker than the second half.
There’s nothing here by itself to rattle the market but the cut in guidance for 2013 is likely to just reinforce recent worries about earnings and revenue growth that built up last week and led to Friday’s big drop in the indexes. Until some company reports a solid surprise, I think this will keep the trend to the downward side.
U.S. stocks traded in the red for most of the day before finishing up 0.04% for the Standard & Poor’s 500 and 0.02% for the Dow Jones Industrial Average mostly on a strong day—a 3.97% gain--from Apple (AAPL). Shares of Caterpillar ended the day up 1.45%.
After lowering guidance last month, Caterpillar (CAT) did manage to beat Wall Street earnings expectations for the third quarter. After adjusting for changes in tax rates and a one-time gain on a sale of a majority interest in the company’s logistics business, earnings of $2.33 a share were above Wall Street projections of $2.22 a share. Revenue, however, came in short of Wall Street forecasts of $16.79 billion at $16.45 billion.
But it was the lowered guidance for 2012 and a flat preliminary forecast for 2013 that hit the market’s worry zone. Caterpillar lowered its 2012 guidance to $9.00 to $9.25 a share from the previous $9.60. The Wall Street consensus had been at $9.41. That works out to fourth quarter earnings of just $1.70 a share, well below the Wall Street consensus at $2.31. The company now projects revenue for 2012 at $66 billion, down from the previous range of $68 billion to $70 billion. For 2013 the company told Wall Street to expect revenue in a range of plus or minus 5% growth. If you think of that as a projection for essentially flat growth, it is significantly below the current Wall Street consensus of 5% growth in 2013. Caterpillar also said it expects the first half of 2013 to be weaker than the second half.
There’s nothing here by itself to rattle the market but the cut in guidance for 2013 is likely to just reinforce recent worries about earnings and revenue growth that built up last week and led to Friday’s big drop in the indexes. Until some company reports a solid surprise, I think this will keep the trend to the downward side.
U.S. stocks traded in the red for most of the day before finishing up 0.04% for the Standard & Poor’s 500 and 0.02% for the Dow Jones Industrial Average mostly on a strong day—a 3.97% gain--from Apple (AAPL). Shares of Caterpillar ended the day up 1.45%.
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