Wall Street anticipates that the Dow Jones member will earn $1.28 per share for the quarter, which is down 12.33% from last year's $1.46 per share. iStock expects the industrial goods company to miss Wall Street's consensus number. The iEstimate is $1.24; four pennies below the street's outlook.
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If the iEstimate is correct or at least on the right side of the surprise, it would be the fifth consecutive bearish surprise from the CAT. In the twelve previous quarters, Caterpillar delivered 11 bullish surprises with just one misstep. The trend is your friend until it is no longer the trend.
While the heavy/farm equipment maker's bottom-line appears to be streaky, CAT's earnings-driven, stock price performance has split right down the middle for the last 16 quarters with eight red and eight green reactions. However, the January announcement has favored a price increase over a decline by three to one in the last four years.
That being said, gains weren't Earth moving at 1.6%, 2.6% and 3.6% in the three days surrounding earnings. What's with the point six? The lone January dip violated the .6 rule but was tame at -2.40%. Could they find another 0.20%?
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Caterpillar shareholders have to be concerned with an economic slowdown in China and International Business Machines Corp.'s (NYSE:IBM) Chinese woes. Last quarter, CAT's sales in China improved in a quarter where sales decreased 18% year-over-year. If China starts to slow, the wheels could come off, as they say.
According to the Equipment Leasing & Finance Foundation, agricultural equipment demand is falling; industrial machinery is growing slightly above average; transportation equipment is experiencing slow to average growth; construction equipment is forecasted for slow to average growth, too. That's not an encouraging montage, is it?
On the positive side, Caterpillar's management appears to be readying for slower times as inventory fell 13.86% in Q3. Management also is doing their part to manage the income statement and squeeze as much as possible out of sales. In the third quarter, total operating costs fell 12.27% as sales dropped at a faster clip of 18.16% year-over-year.
Overall: The iEstimate and current market conditions suggest Caterpillar Inc. (NYSE:CAT) is likely to make it five, five misses in a row. However, CAT's January EPS price-sensitivity could mean the price stays close to home despite another earnings miss.
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