Although the S&P 500
Twenty of the 30 Dow components were down this week, but one Dow stock surged. Check out the Dow's five biggest gainers:
Weekly Price Gain
Bank of America
Of the five, three reported earnings (Caterpillar, DuPont, and 3M), while Bank of America and Alcoa showed their tendency to be sensitive to every little change in economic sentiment. This week's biggest news on that front was probably the Fed's announcement that it will seek to keep short-term interest rates low till at least the end of 2014 (the previous guidance was until mid-2013). And speaking bank-specifically, on Friday the White House announced an incentive change to its Home Affordable Modification Program to encourage investors to assist troubled homeowners by forgiving principal.
Caterpillar, DuPont, and 3M all beat Wall Street earnings estimates, but it was Caterpillar that surged the most, up 5.3% for the week.
For those hoping for a U.S. construction recovery and global growth (ostensibly, this includes B of A and Alcoa shareholders), Caterpillar brought some favorable forecasts. Among the slew of economic assumptions Caterpillar shared were:
- "Our outlook assumes economic growth in the United States of at least 3% in 2012."
- "We expect total U.S. construction spending, which, net of inflation, has declined since 2004, to finally begin to recover in 2012."
- "For 2012, our outlook assumes economic growth for the Eurozone near zero and growth of about half of a percentage point for Europe in total."
- "Our outlook assumes most commodity prices will increase slightly in 2012 and continue at levels that encourage investment."
- "We expect economic growth in Asia/Pacific will exceed 6.5% in 2012, about the same as in 2011."
- "We expect China's economy will grow 8.5% in 2012, sufficient for growth in construction and increased commodity demand."
To read the entire laundry list of assumptions, read its earnings report here.
Beyond its 2011-completed acquisitions of Bucyrus and Motoren-Werke Mannheim Holding GmbH, the state of the global economy will determine whether Caterpillar can reach its 2012 sales target of $68 to $72 billion and its midpoint earnings per share estimate of $9.25 (which would put Caterpillar's current share price of $111.28 at 12 times 2012 earnings).
In short, as the world economy goes, so goes Caterpillar -- assuming you like its business operations, of course. For more ideas, check out the Fool's "Fourth-Quarter Earnings Report: 7 Stocks You'll Want to Watch." In the video, you'll find information on this quarter's possible big performers. It's completely free for our readers, so click here to access your free report
Anand Chokkavelu owns shares of and long-dated options of Bank of America. The Motley Fool owns shares of Bank of America. Motley Fool newsletter services have recommended buying shares of 3M; and creating a diagonal call position in 3M. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.