Tuesday, 27 January 2015

Caterpillar has a shocker

Caterpillar shares have had a bit of a shocker today pushing below the US$80/share level:


Why was this?  Reading an early section of the Q4/FY document you would be hard pressed to see the problem...

...but then a quick glance at the details in the Q4 numbers shows some of the challenges.  Price realisation may be ok as are sales to the US...but everything else is simply shabby:
And the reason for this?  A pincer movement negative of the oil price impact and a slower Chinese economy: 


Leafing through the conference call the tone was unsurprisingly poor.  No surprises given that as the Bespoke Invest guys observed the stock 'hasn't gapped down more than 6% on an earnings report day since July 2007'.

The company is continuing to return cash to shareholders (3% dividend, c. 8% of market cap buyback) and that - at least - is something to grab hold of.  On the basis I am still retaining my Volvo short exposure I took advantage of the big fall to buy back/cover some of the short position I had.  Uncertainty clearly remains high - and CAT's poor numbers are correctly being given a wider negative interpretation for the economy, markets and companies within them.  That pro-volatility world I continue to see in 2015 still feels right to me.

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