Eli Lustgarten, Longbow Research senior research analyst, breaks down the Q1 numbers on Caterpillar’s earnings andthe company’s outlook on growth and global demand, with Mario Gabelli, GAMCO Investors chairman & CEO
Video and COMPUTER transcript below
numbers. good news all around. what’s the big takeaway for you? profitability is much franker than most people expected. top line was a little bit soft. mostly timing. but the number was quite strong for the quarter. and 2.37 beat everybody. how is that changing your forecast going forward? herndon hates. you know, they grow their guidance from 9.25 to 9.50. we’re at 9.60. might raise it a little bit. the economy is a big factor. domestically the business is quite strong. you’re seeing weakness in china and brazil and europe beginning to hit and we just went into a case, they dropped their global forecast because of international markets. you’re seeing the effect of markets outside. secondly caterpillar is selling off the service business. they announced a billion dollars worth of deals. so you can’t push the numbers too far but they are going to do 9.50. they will be fine this year. you have to temper it in the fact this is a very tough global environment. is there a takeway about the u.s. economy here? the takeaway right now is the construction markets are showing a little bit sign of life. we’re hearing that from all the companies both residential and nonresidential are starting to perk up and the equipment purchases by the dealers have remained robust and try to get into position to handle which shall be a better market for the next year. looking into 2013 and 2014, assuming you get brazil and china now back on track so to speak for cat, what are your numbers for that period of time? well, the company is talk about trying to get to $15 plus by mid-decade and that does not seem to be a big stretch. how quickly they get there is your global economic forecast. if you’re going to do ten bucks this year not hard to do 15 or 20 next year. assuming they hit it earlier than later what do you think it’s worth? you , if it isn’t $150, probably say what is wrong with the system and it’s not hard to get numbers closer to $180. was the revenue number 15? what was the revenue number. the machinery and power number was 2.88. the total, we’re showing it in line. revenue was light. that’s the machinery and power number, which is the machines and power systems. the rest is the credit companies. credit companies comes out basically in line but the machinery and equipment number is what you look at about 100 million. they got a great balance sheet, great cash flow. is there another bucyrus there, eyes of the future so to speak. another deal that puts them into another portion of the market that they are not in currently? well there’s always one that’s possible but i think for the next 12 to 18 months they will sit there and absorb all the mining. they made three big acquisitions. i wouldn’t aspect them to do a big one in the short term. thanks for joining us this morning. my pleasure. all right. when we come back, a new case of mad cow has beef futures down by
