On FY 2017 revenue, labels $38B consensus forecast "a reasonable midpoint expectation," citing sustained commodity prices, China construction, developing nations construction and encouragement on potential U.S. infrastructure bill, tax reform, new regulation, commodity prices and recent OPEC developments. However, cites concerns involving volatile oil prices, North American weakness, economic growth in Europe post-Brexit, power generation and North American rail customer sales.
For 2017 EPS, views $3.25 "too optimistic considering expected headwinds," noting that at $38B, sales are approximately $1B lower than 2016 outlook, resulting in a variable margin headwind of $350M-$450M. Additionally observes short-term incentive compensation for employees projected to come in $500M-$600M higher than in 2016 and for Cat Financial to be unfavorable at around $100M. On the tailwind side, sees $300M-$400M in cost reduction carryover resulting from restructuring activities, and further, cost reductions and operational improvements to be favorable at $300M-$500M.
Remains committed to decrementals of 25%-30%, excluding restructuring costs.
Caterpillar shares +0.63% at $96.16.
Credit Suisse conference presentation (ongoing)