10/22/2012
By David Silver

Before the opening bell this morning, Caterpillar (CAT) released earnings for its third quarter of fiscal year 2012.  As the world's largest manufacturer of bulldozers, excavators and other construction machinery, Caterpillar is closely watched as a gauge of the strength of the global economy. Revenues continued to rise, while earnings increased almost 50% on the back of an asset sale.  The Company reported earnings, excluding items, of $2.54, up from $1.71 last year.  Revenue increased to $16.45 billion from $15.72 billion during the same period last year. CAT beat by $0.32 per share on the bottom line, but fell short of expectations on the top line as the Street had expected the Company to earnings $2.22 per share on revenues of $16.79 billion. The biggest news, however, is that management lowered its forecasts for FY12.  Management lowered revenue to approximately $66 billion, below the previous expectation of between $68 billion and $70 billion.  Earnings per share guidance was lowered to between $9.00 and $9.25 per share compared to the previous forecast $9.40 per share. 

CAT chairman and CEO Doug Oberhelman said, "We are taking a pragmatic view of 2013 — we're not expecting rapid growth, and we're not predicting a global recession. At this point, we expect 2013 sales will be similar overall to 2012, but with a slightly weaker first half and a slightly better second half. While there's reason for optimism, and we're not expecting a global recession in 2013, we are prepared and stand ready to take action no matter what happens to the global economy."

CAT is only down slightly in the premarket.  The Company's expectations for the remainder of the year should not have come as much of a surprise; management slashed its 2015 growth forecast at the end of September amid a "perfect storm" of slowing economies and lower commodity prices.  Management doesn't expect the world to slip into another recession, but it does expect continued softness.  There were no Google like surprises in CAT's earnings as most of the weakness for the economy has already been warned and priced in. 

David Silver
Wall Street Strategies

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