Commodities & Metals

Caterpillar Crushes Estimates With Strong Guidance (CAT, DE, JOYG, CNH, AGCO, MOO)

Excluding the impacts of absorbing its recent acquisition of Bucyrus International, Inc., Caterpillar Inc. (NYSE: CAT) posted an all-time high in sales, revenue, and profits in the third quarter. Even with those impacts, Caterpillar managed to beat handily consensus estimates of revenue and profit. And the company expects to post revenue and profit at the high end of its previous estimates, even including the impact of the acquisition.Analysts were expecting EPS of $1.55 on revenue of $15.03 billion. Including Bucyrus, the company posted EPS of $1.71 on revenue of $15.72. Excluding Bucyrus, EPS came in at $1.93 on revenue of $14.58 billion.
Caterpillar has set a high bar for Deere & Co. (NYSE: DE), Joy Global Inc. (NASDAQ: JOYG), CNH Global NV (NYSE: CNH), and AGCO Corp. (NASDAQ: AGCO). Deere, which does not close its quarter until the end of November, is expected to post EPS of $1.43 on $7.83 billion in revenue. Joy Global’s quarter ends this month, and estimates are EPS of $1.86 on revenue of $1.35 billion. CNH reports earnings on Thursday, and consensus estimates call for EPS of $0.82 on revenue of $4.2 billion. AGCO reports earnings tomorrow and is expected to post EPS of $0.76 on revenue of $2.02 billion.

Looking ahead, Caterpillar raised its revenue guidance from $56-$58 billion to $58 billion, including about $2 billion from Bucyrus. EPS guidance was changed from $6.25-$6.75 to $6.75, including a negative impact of about $0.50 from the Bucyrus deal. The company hailed the recent passage of three free-trade agreements and “the growing understanding that we need to do something positive about infrastructure in the United States.” Needless to say, Caterpillar hopes to profit from both.

For 2012, Caterpillar continues to be optimistic. The company expects sales and revenues to increase by 10%-20%, much of which will come from Bucyrus. Caterpillar expects Bucyrus to boost total sales by about $5 billion next year. The company did not provide EPS guidance for 2012.

Of the company’s $1.14 billion in profit, more than 30% was attributed to a favorable exchange rate. The weaker US dollar clearly helped the company in the third quarter, but as the dollar gains strength profits could slow down. The company also reported weaker sales in China, and noted that sales rose in developed countries although total sales of new machines in developed countries “remain significantly below previous peak levels.”

Order backlog has climbed to an all-time high, and the company expects commodity prices to remain high enough to maintain current investment levels from Caterpillar’s customers. In developed countries, Caterpillar believes that deferred replacement of equipment will pick up modestly, while in developing countries the company expects more construction activity to drive additional sales. If sales in China continue to weaken, that may be a tough goal to reach.

Shares of Caterpillar are up about 5% a half hour before the market opens this morning, at $91.65 in a 52-week range of $67.54-$116.55. Deere is up more than 2.5%, at $74.10 in a 52-week range of $59.92-$99.80. Joy Global is up about 2.8%, at $84.10, in a 52-week range of $57.48-$103.44. The Market Vectors Agribusiness ETF (AMEX: MOO) is up about 1.5%, at $49.37, in a 52-week range of $39.86-$57.93.

Paul Ausick