No Butterflies Here: Caterpillar Dives In Nauseating Knee-Jerk To Earnings Miss

You can add Caterpillar to the growing list of bellwethers that have disappointed the Street over the past couple of months.

Q4 adjusted EPS was $2.55, missing consensus by a mile and coming in well below even the lowest analyst estimate. The top line was a miss too ($14.3 billion versus $14.36 billion).

Perhaps worse, it looks like the guidance is uninspiring. The company is looking for 2019 profit to rise to “a range of $11.75 to $12.75 per share”. That’s versus consensus of $12.72, although the range of estimates is pretty wide.

A quick search of the release for the only word that matters (i.e., “China”) finds the following line:

Sales in Asia/Pacific declined due to lower demand in China, partially offset by higher demand in a few other countries in the region.

That’s not what anyone wants to hear. And neither, generally speaking, is this:

Our [2019] outlook assumes a modest sales increase based on the fundamentals of our diverse end markets as well as the macroeconomic and geopolitical environment. We will continue to focus on operational excellence, including cost discipline, while investing in expanded offerings and services to drive long-term profitable growth.

I’m hardly a Caterpillar analyst, but what I would gently suggest is that in the current environment (characterized as it is by nagging concerns about the trajectory of global growth), you don’t want to hear a lot of references to “modest” and “cost discipline”, etc. from a bellwether.

All of that shouts “caution” – or at least it will to those inclined to sell on anything less than a blockbuster quarter, which is apparently everyone in the premarket on Monday. This could well turn around throughout the day, but the knee-jerk is not inspiring:

(Bloomberg)

Obviously, this will conjure up all kinds of allusions to last year’s “high-water mark” boondoggle. Hopefully, we won’t get a repeat of that communications misstep on the call.

Full release