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What I’m sensing about Monday’s earnings report

Interest in Caterpillar’s earnings report has juiced my page-view counts to all-time highs (granted, all-time is only six weeks and starts from a zero base), and it’s also generated a fair amount of buzz online. Stocktwits had a big spurt in the past three days after a comparatively quiet three weeks before that. Sample posting:

With $CAT probably not making earnings Monday, is it good time to buy when it gets crushed?

My hunch is a lot of people think Cat will get spanked hard tomorrow — which could be bullish if you’re a daring contrarian who can get in and out fast enough. There’s often a lot money to be made zigging when the herd zags. But there’s always the potential for getting trampled. This long look at what’s coming up this week across the market shows we’re rolling into the busiest week of the earnings season. Couple thoughts:

  • We’ve just come off a train-wreck fourth quarter that will pummel cat and dog alike. How does this translate into better earnings per share, the fundamental driver of stock prices?
  • How long would you want to be in a market where even Microsoft — whose software is installed in nine out of every 10 personal computers on the planet — is offering no guidance for 2009?

The bullish case for Caterpillar is not that Obama’s billions will sell more tractors. I think it’s more anthropological: what sets our species apart is our ability to make ever more complex tools, and to build ever-more complex societies. Caterpillar builds the tools that enables these societies to evolve.

Of course, lots of companies build tractors, engines and machinery. Caterpillar dominates most of the markets it operates in because its tools help people build things efficiently and profitably. Doesn’t mean Cat will always be able to do this, but for now, Cat is on top of the heap and it has enough people who recall the near-death experience of the early 1980s to know there is no choice but to cling to their competitive edge with everything they’ve got.

As for Monday, I cannot help but agree that Cat seems to be in for a body blow, and that the rest of earnings season may pound it lower over the next few weeks. Yahoo Finance’s message board traffic is dominated by a guy who posts under the handle Benwaw58, who thinks Cat will most likely get down around 30, give or take a point or two, before a sustained rally kicks in. That’s down another 14 percent from last Friday, so it won’t be pretty. He’s watched the stock since the 1970s so he has a good grasp of its ups and downs, including those dark days of the early Reagan administration.

Perhaps the best clue on what happens tomorrow lies in the past: read the transcript of Cat’s third-quarter earnings call and ask yourself what has changed.

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Tom Mangan posted at 11:10 am January 25th, 2009 |

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  1. The Glittering Eye » Blog Archive » Caterpillar Layoffs says:

    […] were his comments yesterday: As for Monday, I cannot help but agree that Cat seems to be in for a body blow, and that the rest […]

    Permalink | Posted January 26th, 2009, at 7:19 am

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