View the full cat chart at Wikinvest

Cat Stock Blog

Caterpillar Inc. (NYSE:CAT) stock news and links

Archive for the ‘Analyst ratings’ tag

Caterpillar now on Goldman Sachs “conviction sell” list

One of the reasons Caterpillar’s getting pounded this morning is Goldman Sachs adding it to a “conviction sell” list. What they mean:

“We see an absence of catalysts near term, with Caterpillar earnings per share likely to bottom later (2010) than most industrials (2009) given high exposure to commodity producer capex,” Goldman analysts wrote in a note.

The analysts also said the company’s 2009 earnings outlook of $2.50 a share was “risky.” Goldman expects $2 a share. However, CAT Financial’s outlook of a 50 percent drop in earnings is reasonable, Goldman said, and added that the downturn may encourage the financial unit to de-lever.

Have to say I’m a bit dubious about the $2.50 EPS number myself; it felt rather arbitrary.

(Homework assignment: Find out how much leverage Cat Financial is carrying.)

no comments | Permalink | Tags:
Tom Mangan posted at 8:01 am January 30th, 2009 |

Morgan Stanley dumps on Caterpillar

UPDATE: Associated Press offers more detail on Morgan Stanley’s report on Caterpillar:

Morgan Stanley (nyse: MS – news – people ) analyst Robert Wertheimer dismissed the idea that federal spending will offset the sector’s woes.

“We doubt (federal) stimulus (spending) will have much of an impact on equipment sales, especially in 2009,” he wrote in a note to clients. “Current talk in D.C. still supports around $85 billion in infrastructure (spending), with half contracted within the year, and a likely multi-year spending curve. The resulting math does not mean much in a trillion dollar construction market.

“With a multi-year ‘spend’ on most infrastructure projects, and the prospect for about half the total to be planned by mid year 2009, we think it likely that the total incremental spend will be only $10 billion to $20 billion this year – very little relative to the trillion dollar US construction market,” he added.


The Notable Calls blog quotes a Morgan Stanley note saying the risk/reward for Caterpillar is getting scarier.

Recent comments by the CEO of competitor Hitachi Construction—who has “never before experienced seeing sudden, simultaneous drops in worldwide demand” and is seeing global demand down 25-30%—support their bearish view on the shares. MSCO’s 2010 EPS estimate of $2.57 is 40% below consensus ex-MS. CAT has held that emerging markets revenues would grow in 2009; they’ve argued for a steep fall but allowed for the possibility of upside. Upside now seems very unlikely.

So that’s why Cat’s getting pummeled even worse than the broader indexes today.

no comments | Permalink | Tags:
Tom Mangan posted at 7:55 am January 14th, 2009 |

Wachovia maintains “market perform” rating on Caterpillar


Wachovia analyst says, “Based on our channel checks, we are seeing further weakening in Europe and American demand and pricing environment and a likely H2 09 flattening of Electric Power demand…We are reducing our 2008E (to $6.01 from $6.08), 2009E (to $6.25 from $6.50) and 2010E (to $7.35 from $7.70). We are pushing out our N American recovery timing expectation to 2010 from 2009, and we are decreasing expectations for Europe, Africa and Middle East…We expect volatile performance near term due to global macroeconomic uncertainty. We continue to expect CAT to achieve earnings growth through the next few years on the strength of its exposure to the mining and energy markets.”

Mining and energy, where prices are totally in the tank … hmmm.

no comments | Permalink | Tags:
Tom Mangan posted at 11:04 am December 23rd, 2008 |

Analysts who cover Caterpillar

no comments | Permalink | Tags:
Tom Mangan posted at 9:21 am December 15th, 2008 |

About that Goldman downgrade

The excellent Seeking Alpha blog questions the Goldman Sachs downgrade of Cat last Friday. The writer concedes the point that Caterpillar is going to get hit by slower capital expenditure spending in the coming year or so, but it also throws a lot of cold water on GS’s calls on the commodity market, which was clearly driven to absurd heights by speculators — too much money chasing too few options and futures contracts — rather than significant increases in demand for the underlying commodities.

How much faith should we put behind these estimates? It’s a simple question, and borne out of no disrespect for Goldman. There are plenty of smart folks over there, and to say that it’s been the toast of the industry for the past decade is quickly becoming a cliché. Goldman deserves credit for being early on the calls for rising oil in 2007, and for accepting recession conditions in the U.S. this spring.

That being said, it sure was swept up in the tight supply, global-growth fed theory of higher commodity prices this summer, and overshot way big and way late. Now it has set its 2009 estimates for aluminum and copper below the current spot prices ($1525 for aluminum on the LME in the front month, and $3232 for copper) which many (including myself), contend have oversold due to the same forces that drove prices up so high in the first place.

Exec. summary: Demand and China and India — and a strong global brand — will most likely save Cat’s bacon. Read the comments for more juicy dis of Goldman Sachs. Loved this one:

Isn’t it crazy when after a stock has had a long ride on the downside and has about bottomed out, that the rating agencies and brokers, (like Goldman, etc.) then wake up and all of a sudden decide that the stock should be down graded. Is this stupidity or a phony ploy to drive the stock lower since they have shorted it. It is probably both and this is what has allowed cynics to believe that the market is rigged, especially against the public.

The market’s rigged against the public? Say it ain’t so, Joe!

Also at Seeking Alpha: Blogger Dr. Duru summarizes downgrades across the construction sector. Interestingly:

I have to agree that continued declines in oil prices (and commodities in general) will undermine the buying theses for infrastructure stocks. But with the gears of reflation spinning frantically across the globe, I remain more interested in looking for buying opportunities in this sector than selling (shorting) ones. If the charts of these infrastructure plays eventually break down, I will consider such action a reinforcement of the economic danger implied in the current acceleration of job losses in the U.S.

As the Doc always notes: Be careful out there.

This piece in the Wall Street Journal (subscribers only, alas), buys the GS party line, but notes one interesting detail:

Caterpillar counts about 50% to 60% of its profits from the mining and energy industries, according to the Goldman Sachs analysts, and they said the commodity downturn is likely to hurt the company until 2010.

True enough, but low commodity prices are generally good for the economy over the long haul, and more tractors get bought in up economies than down ones.

And a note for options cowboys: a Cat straddle.

no comments | Permalink | Tags:
Tom Mangan posted at 5:57 am December 15th, 2008 |

Ouch: Cat downgraded by Goldman Sachs

Target price cut from $38 to $32:

“We don’t expect Caterpillar earnings to bottom until the second half of 2010 and recent gains on stimulus optimism is likely to be more than offset by the reality of cuts in mining and oil & gas capex,” analyst Terry Darling wrote in a note to clients.

Double ouch: Down 4% in the premarket and the failed-bailout fun hasn’t even started yet.

If I were into that whole guilt-by-association thing I’d note that former financial high-flyers like Goldman were the architects of the current mess but it wouldn’t change the facts.

no comments | Permalink | Tags:
Tom Mangan posted at 6:30 am December 12th, 2008 |