When Caterpillar Told You Q1 Was As Good As It’s Going To Get, What They Actually Meant Was That Things Are Going ‘Exceptionally’ Well

Yeah, so back on April 24, Caterpillar did something stupid. Specifically, they said this on the call after reporting what was otherwise a great quarter:

And it’s often the case the first quarter got off to a slow start for projects spent. We expected targeted investments for future growth to be higher over the remaining three quarters. The outlook assumes that first quarter adjusted profit per share will be the high-water mark for the year.

See that bolded bit? Yeah, well cue Elf:

Image result for elf noooo gif

Here’s what we said at the time, commenting on what ended up being an ~800 point haircut off the overnight highs in Dow futs that day:

It was Caterpillar that pulled the rug out, a cruelly ironic twist given how strong their quarter was. A beat and raise from a global bellwether like CAT are usually exactly what you want if you’re a bull, but let me tell you exactly what you don’t want. Exactly what you don’t want is for someone to jump on the call and say that the previous quarter “will be the high-water mark for the year,” which is exactly what they did.

Transparency is always nice, but that’s too much transparency. There are all manner of ways to say that without couching it in those terms and that one misstep was enough to turn what should have been a great day for the shares into an absolute rout.

And then we went further:

What started with a “stunning beat and raise” from CAT (to quote Buckingham’s Neil Frohnapple) turned into a “stunning” reversal of fortunes midday when these morons made the mistake of using the phrase “high water mark” on the call (I mean, I’m feeling particularly prickly today, but who the fuck says that on a call?):


One thing that was interesting about the “high-water mark” comment was that it came hot on the heels of what certainly sounded like Beijing tipping more fiscal stimulus to counter a possible slowdown in China’s economy. So you know, “connect the dots, la, la la” when it comes to the global growth outlook.

Well anyway, these morons at CAT have apparently had just about enough of hearing about that rather unfortunate boondoggle, so on Tuesday they went ahead and “clarified” it as follows:

All we meant was that we had an exceptionally strong first quarter.

That came from Caterpillar management at the Wells Fargo Industrials Conference and hilariously it gave the shares a boost.

Wells Fargo is going to go ahead and accept that as an explanation that makes sense. Here’s the bank’s Andrew Casey:

CAT management presented at our 2018 Industrial Conference [and] in its presentation, management further explains its Q1 18 high water comment and indicated this was more related to near-term margin pressure and not volume.

We continue to think CAT was trying to restrain expectations after reporting record performance and raising earnings guidance. Its clarified comments should help offset investor concerns about visibly peaking end market demand.

Appreciated, Andrew, but I’m not sure management’s “clarification” is anymore convincing than it would be for me to take a woman to dinner at Applebee’s, tell her “that’s as good as it’s going to get, baby” and later say:

All I meant was that we had some exceptionally loaded potato skins.

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