Caterpillar CEO: Realignment of China economy to affect sales


China's strategy to shift from an investment-led to a consumption-based economy will have an impact Caterpillar's (CAT) sales, CEO Douglas Oberhelman says.

However, the government's urbanization drive could continue to support demand for Caterpillar's construction equipment.

While China's economy is slowing down and there are fears about soaring debt, Oberhelman is more concerned about the speed of reform, meaning the "opening of the capital market, (and) moving to a market orientation to really propel the economy into the next phase."

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Comments (1)
  • jbde
    , contributor
    Comments (672) | Send Message
     
    Once again management has to acknowledge reality.
    And once again, they will underestimate the impact.

     

    CAT has been propped up with hope and of course its dividend.
    Recent rising rates make the dividend 'less' attractive on a relative basis.
    Is there a point where the dividend will be in jeopardy?
    Mgmt will do [say] everything they can to support the stock. But in the face of several qtrs. of losses, what will happen?
    They cannot hold back the tide for long - and the markets will anticipate the problems as the hope for realigned dealers [nice terminology] proves a mirage.

     

    A break of the recent support and 50-dma should now be about to happen - less than 5% away.
    As the WW economic situation deteriorates rapidly over the next few months, a test of the 80 level is not far fetched.

     

    Slowing manufacturing in China is certainly not good for miners and especially mining equipment suppliers.

     

    Coal is down and out, being supplanted by nat gas.
    Copper stockpiles are probably higher than publicly known.

     

    Without a concerted infrastructure works program in the US, we alone cannot be the only area that supports CAT. Losing power generation contracts to Cummins, et al does not help either.

     

    Sorry, but I see CAT as a house of cards - just a little shake and down it comes.

     

    So, what is the bull case?

     

    With the negatives piling up, it will be a matter of time - when markets correct, basic materials, mining and mining equipment stocks will lead the downside.
    24 Mar 2014, 10:15 AM Reply Like
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