Caterpillar Gears Up as the Dow Jumps to Near-Record High

The market is closing out the week on a high note, with the Dow Jones Industrial Average (DJINDICES: ^DJI  )  up 26 points as of 2:35 p.m. EDT and still flirting with another record high. While the index has dropped a bit in afternoon trading, the majority of the index's member stocks remain in the green. Caterpillar  (NYSE: CAT  )  is up 1.7% to become the big winner on the Dow so far today, even on lackluster sales news. Meanwhile, Shire Pharmaceuticals (NASDAQ: SHPG  )  shares have gained nearly 17%. Let's catch up on what you need to know.

Caterpillar sales under fire

Source: Caterpillar Media Gallery.

Caterpillar's stock leaped more than 19% since 2014 kicked off, but the company is still working on how to turn around the ongoing sales slide of its heavy machinery. The industrial giant this week reported that its Asia-Pacific dealer sales declined by 30% in the three months ended in May, worsening a 25% slump in such sales from the three-month period through April. Overall dealer sales declined by 12% in the three months that ended in May, with even some of the company's best-performing regions feeling the hit from the mining sector's slump.

Mining has struggled to recover in the years since the recession ended. Caterpillar's resource industry group, which produces machinery for the mining sector, saw dealer sales slump by 69% in its Asia-Pacific business and by 47% in its Africa, Middle East, and European group. Only North America showed any sign of success over the latest three-month reporting period, as the resource industry saw a 7% increase in dealer sales. While the U.S.' ongoing housing rise and steady economic growth bode well for Caterpillar -- particularly as the company's largest geographic segment -- the company will need to ratchet up international revenue in the near future. Sales from outside of North America made up more than 60% of the company's overall revenue last year, and the Asia-Pacific region in particular saw a 28% overall revenue decline in 2013.

In the health-care sector, Shire's stock bloomed today after the company turned down the latest buyout bid in what has turned out to be a year dominated by merger and acquisition talk in the pharmaceutical industry. Big Pharma's AbbVie (NYSE: ABBV  ) offered more than $46 billion to acquire Shire, hoping to follow in the footsteps of Medtronic's recent big buyout of Covidien (NYSE: COV  ) by snapping up a foreign competitor and incorporating abroad. AbbVie can maintain its pursuit of Shire until mid-July under U.K. rules before having to wait six months to try again, so this acquisition hunt may continue if AbbVie is gunning to lower its tax bill.

Shire, however, has made it clear that it's not biting. In a note saying that AbbVie's latest offer significantly undervalues the drugmaker, the company claimed that it can double its annual product revenue to $10 billion by 2020. Analysts have noted that AbbVie, which has made its name selling the world's top-selling drug, immunology therapy Humira, has little synergies with Shire in terms of drug specializations, so likely benefits would stem primarily from the tax savings of incorporating in a foreign nation, along with cost-cutting moves.

Will this stock be your next multibagger?
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3002431, ~/Articles/ArticleHandler.aspx, 10/21/2014 4:23:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement