Caterpillar (CAT) had yet another record breaking quarter! That's right a record breaking quarter! So what gives with the stock price? I have yet to understand some of the price action of late, but the Peoria Powerhouse isn't one to shy away from. I can tell you from the conference call that business is good. Real good! The only thing that could have be taken as a negative is a slow down in China, but yet increased activity in the US should offset the current weakness.
I know that China is always seen as a growth engine for business and that investors panic when they see the slightest bit of negative news coming out of China. However, in Caterpillar's case there is no need to fret. China is a very small portion of CAT sales. Only 3% Yes maybe later down the road China will be a huge growth driver for CAT, but as of right now I wouldn't put to much thought into the slow down in China. Management has already put plans in place to reduce the glut of inventory in China to shift/export to other markets that are on allocation. The US market performed very well and the oil and gas business is on fire! On top of that CAT raised its 2012 profit outlook.
Q1 2012 vs Q1 2011
EPS was $2.37 vs. $1.84 a 28.80% increase
Sales were $15.981 billion vs. $12.949 billion Another 23.41% improvement
Profit was $1.586 billion vs. $1.225 billion
Other positives of note was an increased backlog of Caterpillar products bringing the total from $29.8 billion to $30.7 billion, global mining business is strong in China, operating margins were solid, backlog in mining equipment, and a 73% increase in the resource industry. That means mining! Mining is huge for CAT at the moment and I don't see any slowdown any time soon.
From the numbers and conservative outlook I still believe CAT will be trading north of $130 a share by the end of the year. CAT is still a solid buy in my book.
P.S. I also listened to Weatherford's (WFT) conference call over the weekend and they are still good to go. They started off to a slow start, but business should pick up during the second half of the year.
Have a great night!
Clay-
Full Disclosure
Current Holdings:
Cosi Inc. (COSI)-Monster Portfolio
Caterpillar (CAT)
Westport Innovations (WPRT) Monster Portfolio
Kinder Morgan Energy Partners (KMP)
I'm not a licensed financial advisor. All recommendations is strictly my personal opinion and the information is intended for learning purposes only. Invest at your own risk!
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