Seeking Alpha
Profile| Send Message| ()  
While Caterpillar (CAT) did not blow out the numbers as I had thought, given the strength of Hitachi Construction’s number a couple of weeks ago, Caterpillar simply returned to where it was when I wrote about the strength in Hitachi’s numbers. In that sense, Caterpillar’s stock is performing relatively well.

Caterpillar is still too cheap down here. Management expects better comparisons year-over-year during the second half than the first half. One major problem this quarter was a supply disruption due to a supplier going bankrupt, so hopefully no such unexpected events will cause damage next quarter. Caterpillar is also going through a corporate wide restructuring to squeeze a lot of efficiency out of the whole company’s operation system.

To do so, they’re having to stop and evaluate problems along the way. Yes, “stop” operations to fix the new methods. Given the scale and complexity of revamping its whole operation, I’m actually impressed with how smooth Caterpillar is still doing and am willing to ride this transition through with the management, even though it might be a slow progress whose results might not be immediately apparent.

Yes, housing is still a drag on CAT, but like other multinationals the international business is what we’re buying CAT for, and that business is booming.

Disclosure: Author is long CAT

Source: Riding Through Caterpillar's Transition