Dow Spotlight Stock of the Week: Caterpillar

Since the week of Jan. 22, Caterpillar (NYSE: CAT  ) has only had one winning week. The stock has fallen 10.46% since then, after gaining 5.13% up until that date this year. 

Other industrial competitors have tracked similarly this year. Joy Global (NYSE: JOY  ) , manufacturer of mining equipment, has seen its stock take a very similar trajectory. From the start of the year till Jan. 22, shares were up 4.62%, but since then, they've fallen 15.02%. Likewise, Deere (NYSE: DE  ) , rose 5.33% up to the 22nd, but since then, they've fallen by the same amount. Deere has essentially gone nowhere this year,  while the Dow Jones Industrial Average (DJINDICES: ^DJI  ) has risen 10.74%. But while Deere is flat, it's still better than Caterpillar, which is down 2.38% year to date.

One reason for Caterpillar's declining share price has been the company's poor sales performance. Every month the company publishes its dealer results from around the world, revealing year-over-year sales for a three-month rolling period. The most recent report came out on Wednesday, and for the third month in a row, sales have been declining at an ever more rapid pace.

Reporting Month

Asia/Pacific

EAME*

Latin America

ROW*

North America

World

November

2%

3%

15%

6%

13%

5% 

December

(7%)

4%

14%

2%

(6%)

(1%) 

January

(12%)

1%

3%

0%

(11%)

(4%)

February

(26%)

(9%)

3%

(13%)

(12%)

(13%)

*EAME = Europe, Africa, and Middle East.
**ROW = Rest of World, or everything except North America. 

These sales reports clearly show that business is slowing in the company's key markets -- Asia/Pacific and North America -- and even though Latin America has shown growth, the dollar amount isn't enough to move the needle.

What now?
Caterpillar has long been the heavy-machinery industry leader and is seen as a bellwether for the U.S. and, more recently, the world economy. We've known for some time that China's growth was slowing, and just weeks ago, the government even took steps to purposely slow the country's housing market. Just based on Caterpillar's Asia/Pacific sales, we can see that slower growth is having an effect on sales. But here at home, all data points indicate that the U.S. housing market is just beginning to heat up, and Caterpillar's sales are just starting to decline.

This could be a simple blip, or it could be a sign of more widespread issues in which we see Caterpillar's results pointing toward another recession, similar to how its positive led us out of the last one. I'll keep an eye on things and provide updates as needed. For now, investors should sit tight and follow the monthly sales reports.

One last thing to remember is that the whole industry is performing poorly, just not Caterpillar. If just Caterpillar's stock was falling and the company alone was losing market share, it might be time to question its long-term prospects. But as things sit today, the company is still No. 1 in its industry.

For more Foolish insight on Caterpillar, check out this premium research report, which will walk you through a few key opportunities and risks the company will be facing in the near future. Don't miss a signal that things are about to turn around for the company or fall further because you didn't know what to look for. Get in the know -- click here today.


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Related Tickers

9/19/2014 4:04 PM
CAT $102.51 Down -1.83 -1.75%
Caterpillar, Inc. CAPS Rating: ***
^DJI $17279.74 Up +13.75 +0.08%
DOW JONES INDUSTRI… CAPS Rating: No stars
DE $83.64 Down -0.51 -0.61%
Deere & Company CAPS Rating: ****
JOY $58.01 Down -1.21 -2.04%
Joy Global, Inc. CAPS Rating: ****

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