Good morning America, how are you
Said don't you know me, I'm your native son
I'm the train they call the City of New Orleans
I'll be gone 500 miles when the day is done

City of New Orleans

-Steve Goodman

A lot of our work starts at the top down, or what’s commonly referred to as macro analysis. We can take the lens further and further back to get a general picture then zoom in (micro) for details. Much is being made of the global economy, but it’s really about Europe’s perpetual fall from grace and emerging nations’ growing pangs. When it comes to macroeconomics from the industrial side, the best proxy is Caterpillar (CAT) which laid an egg this morning with a disastrous earnings report.

In addition to the earnings flop, CAT has guided the Street lower and company’s CEO was literally begging the Fed not to hike rates this year even as he said everything would be fine at the end of the year. There were a couple of bright spots, like power generation in North America, but for the most part the report is an unmitigated disaster.

Not what we expected at this phase of the recovery.

Geographic	Revenue	Segment	Revenue	Profit
North America	+9%	Construction	-9%	-26%
Asia	-16%	Resources	-10%	-67%
EAME	+1%	Energy	+11%	+10
Latin America	-13%	Other	-10%	+15%

If we want to just focus on the United States, I can’t think of a better place to begin than the railroads which serve as a great proxy for the economy. Thus far, earnings from the group have been good, but the details tell us more.

KSU 4Q14
Automotive	+13%
Chemical	+9%
Petroleum	+9%

NSC 4Q14
Automotive	Even
Chemical	+11%
Metal/Construction	+5%

UNP 4Q14
Automotive	Flat
Chemical	+8%
Industrial Production	+15%

From Caterpillar to the rails, the big difference was the sudden hit to oil which caught the entire world off guard. However, the misery is now more than off-setting the pluses as jobs are being lost, construction projects are being abandoned and retirement accounts are moving in the wrong direction. The oil patch itself is beginning to really take it on the chin.

Crushing Crude The Count	Rigs	W/W Change	Y/Y Change
U.S. (oil only)	1,317	-49	-99
Canada	432	-8	-158
International	1,313	-11	-22

Crushing Crude Basin	Rigs	W/W Change	Y/Y Change
Marcellus	42	-1	-1
Eagle Ford	181	-4	-35
Permian	481	-6	-3

Crushing Crude State	Rigs	W/W Change	Y/Y Change
North Dakota	169	-9	-22
Oklahoma	193	-8	+6
Texas	753	-13	-86

Yesterday, the Dallas Fed manufacturing report was also a disaster with new orders moving into the negative column for the first time since April 2013.

Capping off the morning was a huge miss for Durable Goods. There were massive revisions that point to an inevitable revision to 3Q GDP.

It has to be noted, all Blue-Chip companies that reported after the bell yesterday and this morning are lower- most down huge.

Company	EPS	Consensus	Revenue ($M)	EPS Guidance	EPS Consensus
MSFT	0.71	0.71	$26,470	-	FY15 $2.66
TXN	0.69	0.69	$3,269	-	FY15 $2.88
UTX	1.62	1.62	$16,996	Q1-2015 $0.57-$0.67	Q1-2015 $0.62
MMM	1.81	1.80	$7,719	-	FY15 $8.20
AKS	0.14	0.08	$1,998	-	FY15 $0.82
AAL	1.52	1.51	$10,160	-	FY15 $10.10
CAT	1.35	1.57	$14,244	FY15 $4.75	FY15 $6.71
GLW	0.45	0.38	$2,602	-	FY15 1.58
DD	0.71	0.71	$7,378	FY15 $4.00-$4.20	FY15 $4.47
FCX	0.25	0.35	$5,235	-	FY15 $1.61
LMT	3.01	2.85	$12,530	FY15 $10.80-$11.10	FY15 $11.49
PH	1.84	1.55	$3,130	FY15 $7.90-$8.30	FY15 $7.90
PFE	0.54	0.53	$13,118	FY15 $2.00-$2.10	FY15 $2.18
PII	1.98	1.94	$1,275	FY15 $7.22-$7.44	FY15 $7.81
PG	1.06	1.13	$20,161	FY15 ~$4.09	FY15 $4.17

 

Comments

Washington and Currency Wars AND potential end to $$ as reserve currency. Co's are running out of accounting gimmicks. Also, why does 1 think many Countries are trying to repatriate their Gold? RLB on 1/27/2015 10:18:58 AM

Love the song you mentioned: https://www.youtube.com/watch?v=PQZlLFKTopg karin on 1/27/2015 10:20:09 AM

Much clatter, all for show. Controls will make comback possible. Looks do matter. Have much influence. Good or bad, hard to tell. Jon Hans on 1/27/2015 11:14:13 AM

forget Terrorism and cyber attacks if dollar losses its' place as worlds reserve currency we are in trouble. Joe Brown on 1/27/2015 12:41:05 PM

When one is drowning, one asks for a life preserver, not a glass of water. Gold equals a life preserver. Tom Wayne Tom Wayne tom wayne on 1/27/2015 1:38:59 PM

Not to worry, if things get really bad, President Obama will swoop in with his goverment bail out $ for each of us...just as long as we are affiliated with the "right party".Just the cost of getting another vote!!! JANE MARTIN on 1/27/2015 8:47:17 PM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.