Quick note about Cat’s conference call
I’m going to wait till the text transcript is posted before I post any thoughts on Caterpillar’s conference call. Most of the chatter was covered in the earnings release but there were a few interesting insights on mining, commodities and Cat’s finance arm.
One thing I’m still unclear on: Caterpillar’s “trough plan” — its playbook for earning a profit when the business goes bad — envisions a profit of $2.50 per share on revenues of $36 to $44 billion. Cat presumably based its trough model on previous downturns, but it also expects the worst economic environment of the post World War II era. My notes of the call have one of the Cat brass saying $2.50 would be double the EPS of the 2002 downturn, one of the mildest recessions of the past 50 years.
How can Cat plausibly expect twice the EPS from 2002 when things look more like 1982? Stay tuned, and I’ll see what I can find out.