Caterpillar's Pessimism Leads To Investor Optimism
BMI View: In line with our assessment that Caterpillar has adjusted its strategy and expectations to meet the market outlook, the company delivered earnings broadly in line with guidance and above analyst estimates for Q4 2013 and FY2013. The news drove a 6% increase in the company's share price on January 27, supporting our outlook that the worst is behind the company, and longer term gains are on the horizon.
Caterpillar reported revenues of US$55.656bn in its 2013 results, a decline of 16% for the year as a whole. The results were in line with the company's most recent guidance of US$55bn for the year, updated in Q3 2013, following a consecutive periods of missed earnings estimates.
The announcement saw the company's share price rise 6%, to reach US$91.29, and we believe further gains are likely over the medium term. Although the company has released guidance for flat revenues in 2014 (US$56bn), we anticipate upside to this outlook; the Construction Industries and Power Systems units should perform well, although the mining division (Resource Industries), will continue to experience weakness.
|Caterpillar Share Price, US$|