Please ensure Javascript is enabled for purposes of website accessibility

An Early Preview of Monday's Caterpillar Earnings

By Dan Caplinger - Apr 19, 2013 at 12:33PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Can the industrial giant give discouraged investors some hope on Monday?

Next Monday, Caterpillar (CAT 1.95%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever surprises inevitably arise. That way, you'll be less likely to have an uninformed, knee-jerk reaction that turns out to be exactly the wrong move.

Caterpillar is a true industrial component of the Dow Jones Industrials (^DJI 1.76%). Its industry-leading construction and mining-equipment business literally helps to pave the way for economic progress. Yet concerns about growth in its core U.S. and Chinese markets have investors uncertain of its future prospects and have made the stock one of the weakest performers in the Dow so far this year. Let's take an early look at what's been happening with Caterpillar over the past quarter and what we're likely to see in its quarterly report.

Stats on Caterpillar

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$13.81 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Caterpillar bounce back this quarter?
Over the past few months, analysts have severely cut their views on Caterpillar's earnings. A $0.34 per-share drop in estimates for the just-finished quarter and a reduction in full-year 2013 estimates of almost double that figure show the extent of the pessimism plaguing Caterpillar. Its stock has suffered the consequences, falling more than 15% since mid-January.

Caterpillar is facing a trifecta of poor economic conditions that have hurt its earnings prospects. In China, slowing growth has raised concerns about whether the emerging nation can manage the difficult global economic environment to produce a normal cyclical downturn, rather than an abrupt recession. Europe's poor economic conditions show few signs of getting better soon as systemic risks to the financial and currency systems loom over the eurozone. And in the U.S., the sluggish recovery has failed to catch fire, even as conditions in the housing market have improved.

Sales declines are clearly to blame for the immediate hit to Caterpillar's stock. By contrast, even though industry peers have seen revenue growth rates slow, they've nevertheless remained positive. Deere (DE 3.80%), for instance, is expected to see sales of its agricultural equipment rise more than 4%, bucking Caterpillar's big drops. In March, Caterpillar reported a year-over-year drop of 13% for the preceding three months, with declines everywhere but in Latin America.

The collapse in gold prices earlier this week added another dimension to Caterpillar's woes. Behind the gold headlines, other commodities also saw sizable losses, sending mining stocks of all sorts lower. Mining-equipment rival Joy Global (JOY) also fell sharply, as it has even greater exposure to China, where commodities activity has been particularly strong. If miners have to rein in production activity even more due to lower prices and relatively high costs, then they'll stop buying mining equipment from Caterpillar and Joy Global, causing another drag on their earnings.

In Caterpillar's earnings report, pay close attention to any long-term guidance the company offers. With past calls stretching out as far as 2015, the company has a keen insight on longer-term trends that most businesses never share with investors. What Caterpillar says could give you a stronger sense of what's ahead not only for the company, but for the overall industrial economy.

Click here to add Caterpillar to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,212.96 (1.76%) $575.77
Caterpillar Inc. Stock Quote
Caterpillar Inc.
$217.14 (1.95%) $4.15
Joy Global Inc. Stock Quote
Joy Global Inc.
Deere & Company Stock Quote
Deere & Company
$360.73 (3.80%) $13.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.