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Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

AHEAD OF THE TAPE: The Caterpillar Indicator

  • Summary: Heavy-equipment leader Caterpillar reports earnings today, and investors are concerned that the 15% stock slide since its May peak will continue. The slumping homebuilders contribute to the challenges at Cat, but only 8% of the company's global sales is for home construction machinery. Commercial construction remains strong, as do energy, mining, and emerging markets sales. The concern is that those core business would be hit by a ripple effect caused by continued weakness in the U.S. housing market and the closely-related factor of American consumer spending. International Caterpillar customers may find that softer end markets for their goods mean they need less infrastructure investment, and Cat would be 'in a tough patch.'
  • Comment on related stocks/ETFs: Last quarter, Caterpillar beat income estimates by almost 25%, yet the stock dropped -- see this quarter's estimates. One way Caterpillar's bracing for the slowdown is by expanding its remanufacturing division. Chad Brand says despite these issues, CAT's aggressive growth plans are altogether achievable. Jim Cramer, a longtime CAT bull, says the company will benefit from the upcoming Highway Bill and shipment to BRIC countries.
Source: Caterpillar May Be Hit By Housing Slowdown