Global machinery giant Caterpillar reports third quarter earnings at 7:30 AM ET. A survey of analysts polled by Bloomberg revealed consensus estimates for earnings per share of $2.23.As the world’s largest construction and mining equipment manufacturer, Caterpillar always has some good insight to offer on the direction of the global economy.
About a month ago, at the MINExpo conference in Las Vegas, Caterpillar surprised many observers when it cut its profit guidance for 2015 and the company’s CEO discussed 2013 recession scenarios.
Then, on Friday, Caterpillar released September dealer sales data, which showed a broad-based slowing in machinery sales growth around the world. BofA Merrill Lynch analyst Ross Gilardi wrote in a note to clients that “the data suggests that the third quarter demand environment was noticeably weak vs the 1H 2012.”
Morgan Stanley machinery analyst Vance Edelson says these are the key questions for investors heading into the release:
- Is the mining slowdown a temporary pause with the long-term super cycle still intact? Is the domestic construction rebound for real this time? Has weakness in China reached an inflection point? Can margins push further into record territory or have they already peaked?
- Is the mining slowdown a temporary pause with the long-term super cycle still intact?
- Is the domestic construction rebound for real this time?
- Has weakness in China reached an inflection point?
- Can margins push further into record territory or have they already peaked?
Edelson expanded on the housing construction and China themes in a note to clients:
CAT itself at MINExpo – which was a mining-oriented event, of course – brought up the fact that housing could become a tailwind for them for the first time since 2006. I would definitely expect that type of optimism to come out again Monday, given that the news the past month has only gotten better on the construction side.
[China] will no doubt come up on Monday. CAT has taken pains to downplay the significance of China. Let’s hope they don’t do that again, because no one believes them.
When I asked them about China, they labelled it a non-issue, and they reiterated it’s only 3 per cent of revenues. But obviously, China is going to drive world commodity markets.
Caterpillar is expected to report earnings Monday at 7:30 AM ET. We will have the numbers LIVE on Money Game >