Caterpillar (CAT -1%) gets dragged down on Deere's (DE -5%) cautious sales outlook for the year,...

Caterpillar (CAT -1%) gets dragged down on Deere's (DE -5%) cautious sales outlook for the year, amid concerns that cool, wet weather in the U.S. will hamper this year's farm crop and hold down demand for farm machinery.
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  • Buysider2
    , contributor
    Comments (344) | Send Message
    It’s unlikely that investors’ concerns about the outlook for farm machinery are weighing on the price of Caterpillar after Deere’s 2Q earnings report this morning, because Caterpillar has not made or sold farm equipment since 2002, when it sold its Challenger rubber-tracked farm tractor and combine business to Agco.


    Investors’ concerns are more likely raised by the reduction in Deere's forecast for its construction and forestry equipment, which segment does compete with Cat and which consists of medium-sized and small equipment that targets primarily housing and light construction markets and not the heavy infrastructure, mining, and oil and gas markets that comprise the bulk of Cat's worldwide sales. Deere’s construction and forestry equipment sales are also not global but are virtually all in North and South America. This morning, Deere reduced its sales forecast for its Construction and Forestry segment to -5% from +3%.


    It’s likely that Deere’s lowered forecast for construction and forestry equipment reflects one of the highest dealer inventories of such equipment in the industry. If Deere’s dealers reduce their inventories of construction and forestry equipment this year, then Deere’s factory sales of such equipment will be lower than its retail sales of such equipment, which would hurt year-over-year sales comparisons for that segment. It could also be that Deere is losing market share in that business.


    There are also concerns about the weakness in the Japanese yen, which could help Cat’s Japanese competitors in their price competition with Cat, concerns about Cat’s global mining markets that are being hurt by falling commodity prices, particularly copper, and concerns about the extent to which Cat’s Chinese markets will recover later this year (which rate of recovery also affects Cat’s global mining and natural resources marked chiefly through mainly its effect on commodity prices).
    15 May 2013, 04:00 PM Reply Like
  • chuck lewis
    , contributor
    Comments (436) | Send Message
    Editor The Lewis Letter
    Time to separate the men (CAT) from the boys (DE).
    15 May 2013, 05:15 PM Reply Like
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