Caterpillar's significant presence and role in supplying construction machinery in multinational markets makes it a de facto indicator of the global economy. That's good news for investors who were pleasantly surprised by CAT's third-quarter earnings report.
Earnings per share of $1.71 was well ahead of estimates of $1.55, while revenue of $15.7 billion easily beat estimates of $15 billion. The stock has shown an impressive 30.16% rally since the start of October, from $70.55 per share to around $92 per share by Monday afternoon.
Reuters reports backlog orders stand at record levels and higher commodity prices lead to a favorable environment for its growing mining business. Better yet, the company is reporting a 44% quarterly earnings increase due to record revenue, and signaled optimism in its 2012 outlook.
"Construction activity is increasing in developing markets, while buyers in more mature markets -- such as the United States -- are buying new machinery in order to replace aging fleets rather than investing for growth. Equipment-rental operators are also purchasing new equipment in order to freshen their fleets, the company said."
So what do the rallying shares mean for the global economic recovery?
According to CAT executives, the company is anticipating developing countries to show continued improvement in what are currently low-level sales. Growth in developing countries is predicted to be similar in 2012 as it was in 2011, meaning high sales of products and services. Overall, CAT expects sales to improve 10% to 20% from the 2011 outlook.
The company is anticipating a slight drop in Chinese demand levels as the government aims to constrict growth. Caterpillar will therefore be building up their China market share with caution.
Otherwise, they believe 2011 signals a continued, albeit slow, economic recovery in developed and developing nations. Do you agree? If so, do other construction companies stand to gain as well?
To help you follow the trends on other construction companies here is a list of the 10 largest construction companies by market cap trading on U.S. exchanges.
All of the names are rallying above their 20-day and 50-day moving averages. Do you think they have more momentum to price in? (Click here to access free, interactive tools to analyze these ideas.)
1. Caterpillar (NYSE: CAT ) : Market cap of $56.46B. Manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. Price per share as of 10/24 at $91.9. The stock is currently performing 17.1% above its 20-day MA, 11.96% above its 50-day MA, and -5.18% below its 200-day MA. The stock has had a good month, gaining 18.91%.
2. Deere & Company (NYSE: DE ) : Market cap of $29.90B. Provides products and services primarily for agriculture and forestry worldwide. Price per share as of 10/24 at $74.51. The stock is currently performing 9.23% above its 20-day MA, 3.14% above its 50-day MA, and -10.27% below its 200-day MA. The stock has lost 4.71% over the last year.
3. Joy Global (Nasdaq: JOYG ) : Market cap of $8.60B. Engages in the manufacture and servicing of mining equipment for the extraction coal, copper, iron ore, oil sands, and other minerals worldwide. Price per share as of 10/24 at $86.25. The stock is currently performing 20.64% above its 20-day MA, 15.1% above its 50-day MA, and -1.41% below its 200-day MA. This is a risky stock that is significantly more volatile than the overall market (beta = 2.15). The stock has had a good month, gaining 28.22%.
4. CNH Global (NYSE: CNH ) : Market cap of $7.73B. Distributes a line of agricultural and construction equipment and parts worldwide. Price per share as of 10/24 at $33.94. The stock is currently performing 19.2% above its 20-day MA, 15.17% above its 50-day MA, however the stock still trades -15.49% below its 200-day MA. This is a risky stock that is significantly more volatile than the overall market (beta = 2.55). The stock has had a couple of great days, gaining 5.57% over the last week.
5. AGCO (Nasdaq: AGCO ) : Market cap of $3.86B. Distributes agricultural equipment and related replacement parts worldwide. Price per share as of 10/24 at $41.63. The stock has recently rebounded, and is currently trading 13.09% above its 20-day MA and 6.92% above its 50-day MA. However, the stock still trades -13.23% below its 200-day MA. The stock has had a good month, gaining 11.02%.
6. Terex (NYSE: TEX ) : Market cap of $1.53B. Terex Corporation manufactures and markets machinery products, equipment, and related replacement parts and components for construction, quarrying, mining, shipping, transportation, refining, energy, and utility industries. Price per share as of 10/24 at $14.9. The stock is currently performing 22.81% above its 20-day MA, 11.16% above its 50-day MA, and -43.42% below its 200-day MA. This is a risky stock that is significantly more volatile than the overall market (beta = 2.68). The stock has had a good month, gaining 30.4%.
7. Manitowoc (NYSE: MTW ) : Market cap of $1.12B. Engages in the manufacture and sale of cranes and related products, and foodservice equipment. Price per share as of 10/24 at $9.19. The stock is currently performing 19.74% above its 20-day MA, 4.38% above its 50-day MA, and -40.48% below its 200-day MA. This is a risky stock that is significantly more volatile than the overall market (beta = 2.78). The stock has had a good month, gaining 24.42%.
8. Astec Industries (Nasdaq: ASTE ) : Market cap of $753.08M. Engages in the design, engineering, manufacture, and marketing of equipment and components used in road building, utility, and related construction activities worldwide. Price per share as of 10/24 at $33.88. The stock is currently performing 8.22% above its 20-day MA, 6.39% above its 50-day MA, and -1.43% below its 200-day MA. The stock is a short squeeze candidate, with a short float at 5.55% (equivalent to 7.77 days of average volume). The stock has gained 11.3% over the last year.
9. Lindsay (NYSE: LNN ) : Market cap of $682.63M. Designs, manufactures, and sells automated agricultural irrigation systems that are primarily used in the agricultural industry to increase or stabilize crop production while conserving water, energy, and labor in the United States and internationally. Price per share as of 10/24 at $57.93. The stock is currently performing 4.96% above its 20-day MA, 2.48% above its 50-day MA, and -10.65% below its 200-day MA. The stock is a short squeeze candidate, with a short float at 16.48% (equivalent to 9.67 days of average volume). It's been a rough couple of days for the stock, losing 8.17% over the last week.
10. Nacco Industries (NYSE: NC ) : Market cap of $608.28M. Engages in lift trucks, small appliances, specialty retail, and mining businesses primarily in the Americas, Europe, and the Asia-Pacific. Price per share as of 10/24 at $76.88. The stock is currently performing 12.68% above its 20-day MA, 9.07% above its 50-day MA, and -16.9% below its 200-day MA. This is a risky stock that is significantly more volatile than the overall market (beta = 2.32). The stock has had a good month, gaining 18.6%.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above.
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