Event: Caterpillar (NYSE: CAT) announced earnings for the quarter ending September on Monday morning. Following a trend this quarter the company beat on the bottom line, but the top line was a miss. Excluding one-time items, Caterpillar earned $2.26 per share in the period. Analysts were looking for a profit of $2.22 per share. Sales came in at $16.45 billion versus an estimate of $16.77 billion. The company also reduced guidance for 2012. Caterpillar now sees full year-earnings of $9 to $9.25. Previously it expected a profit of $9.60 per share for the full year. Shares are down slightly in premarket trading on the news.
Analysis: Caterpillar’s news comes on the heels of a big whitewash in the market. The good news on the bottom line is not likely to take away the sting of a poor top line and reduced guidance for the remainder of the year. Caterpillar’s view that the global economy is slowing should be no surprise. The only question for investors is just how bad it will get. Central banks across the globe are racing to re-inflate economies on a grand scale. In some ways we are in uncharted territory. In the currency markets they say don’t fight central banks. They have far more power than any one trader can wield. In this case I expect the central banks to win. If so, this might be the worst it gets for Caterpillar. With shares trading for less than 10 times now reduced 2012 guided earnings, this might be a stock to own on any selling here.
Action: Let shares gravitate lower today and look to establish a position in the stock for the remainder of the year.
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