The Caterpillar Inc. (NYSE:CAT) Q3 earnings report beat analysts’ expectations, but revenue fell short of estimates and CAT stock has now experienced 47 consecutive declines in global sales.
Caterpillar is one of the world’s largest manufacturers of construction equipment, diesel and natural gas engines and industrial gas turbines, so this long and steady decline in global sales does not bode well for the worldwide economy.
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“Economic weakness throughout much of the world persists and, as a result, most of our end markets remain challenged,” said CEO Doug Oberhelman in a statement when the Q3 report was released in late October. “In North America, the market has an abundance of used construction equipment, rail customers have a substantial number of idle locomotives and around the world there are a significant number of idle mining trucks.”
The company is one of the few U.S. companies that leads its industry while competing globally from a principally domestic manufacturing base. More than half its sales come from overseas customers, making this long decline a cause for concern. (Source: “Is Buying Caterpillar Inc. Here a Winning Strategy? Option Traders Like The Stock,” Frisco Fastball, November 18, 2016.)
Of 22 analysts who cover CAT stock, seven rate it a “buy,” three have it as a “sell,” and 12 mark it as “hold.”
While there were some areas of strength for CAT stock, like rebounded sales in Asia, this trend for global sales is one that it would like to see reversed. (Source: “Caterpillar Retail Sales Decline For Record 47 Consecutive Months,” Zero Hedge, November 18, 2016.)
Credits: Flickr.com/PaulV
The company, with its focus on domestic manufacturing, noticeably shot up following the election of Donald Trump. CAT stock showed gains of over 11% since Trump’s November 8 election victory. But, as we’ve examined before, the Trump effect is new, fickle and—above all—unpredictable. Knowing just what type of effect he will have on the economy over the long term is difficult to gauge.
On the other hand, Caterpillar’s poor showing demonstrates that the world economy is certainly in need of a shot in the arm from somewhere.
