The Big CAT Issues an Optimistic Forecast
I'm tired of all of these earnings beats. I've basically been so inundated with beat after beat after beat of analysts' estimates that I've become numb to them. What I'm looking for now in companies is revenue growth. Companies can only cut expenses for so long. Eventually they will have to grow revenue to show an improvement in earnings.
Fortunately, one of the major themes of my investment portfolio is foreign companies and U.S. companies that have strong overseas operations. Even in a flat environment, as long as the value of the U.S. dollar continues to fall these companies will see improvements in their earnings and revenue.
One company's results caught my eye this morning, Caterpillar (CAT). It beat the consensus earnings estimate by more than ten times, coming in at $0.64/share versus an estimate of $0.06...but that's not what I liked about the its press release. A company had better be able to show decent earnings after hacking 34,000 people off of its global workforce over the past year. What I found interesting was the company's optimistic outlook for 2010.
Back in 2007 at the beginning of this mess, CAT was one of the first companies out there to warn that the global economy was slowing. Today it raised its guidance for the rest of 2009 and for all of 2010. Here's what the company's CEO, Jim Owens, had to say:
While we are still navigating through a very difficult environment in 2009, we see signs of improving economic conditions throughout most of the world...While 2010 will still be a difficult year, we expect improvement in our top line from the lows of 2009, and it’s critical that we manage on the way up as well as we did in the face of declining volume. As a result, we’ve already started planning for an upturn. When it comes, it can come quickly, and we, our dealers and our suppliers will be prepared.
For 2010, Caterpillar expects its sales and revenues to increase between 10% and 25% from the low of 2009. That's certainly not back to the bubble-induced roaring sales that we saw several years ago, but I personally didn't expect the economy to get back to that level for a long time. At this point, any revenue growth is a positive.
As I have been saying, this looks like it's a long ways from the V-Shaped roaring economic recovery that many are expecting yet it's also far away from the end of the massive Great Depression II meltdown that the people at the other extreme are predicting. The truth usually lies somewhere in the middle.
Caterpillar plans for quick economic rebound
Long CAT bonds that I purchased at the height of the credit market meltdown, but no position in CAT stock.