The CAT In The Mine Shaft: With Sales Plunging, Stock At 2-Year High

Bad sales mean moar “stimulus” to the robo traders. After all, CAT’s LTM sales peaked at $67 billion in the year ending in the third quarter of 2012. Since then its been all downhill. By Q2 2013 LTM sales were at $60.4 billion and in the most recent 12-month period the number was $55.7 billion. And, as shown, below, sales of CAT retail dealers, which are a leading indicator of sales booked at corporate, have continued to slide.

There is no mystery as to why. The monumental mining boom of recent years, which was stimulated by a decade of massive money printing by all of the world’s central banks, is now over. Indeed, the big miners who form CAT’s global customer base are in deep retrenchment, canceling mega projects right and left, thereby wiping out orders for big yellow machines almost entirely. Accordingly, CAT hit its “peak bubble” earnings many quarters ago.

In the context of materially shrinking sales and profits (CAT’s operating leverage is huge), trailing earnings are especially meaningful—since the trend of future EPS is definitely southward. In this case, CAT’s LTM reported earnings were $5.87 per share, meaning that it is trading at a fulsome 17.5X peak earnings.

Never fear, however, the sell side analysts are sure that China will turn around any moment now in what would apparently be an even more insane outbreak of credit fueled pyramid building. That, in turn, would bring Australia, Brazil and the Big Miners back to life, followed by a rebounding CAT order book.

Mirabile Dictu! Consensus forward earnings for CAT are estimated at $6.91 per share—a gain of nearly 20% from its LTM results. That means, of course, that CAT’s stock is a real “bargain” at the implied PE multiple of 14.5X—-seemingly an evergreen PE multiple that inevitably goal-seeks its way into the Street’s forward estimates. In any event, the robo-traders already got the word. Some more stimulat’in is coming from somewhere.

By Tyler Durden At Zero Hedge

 Moments ago CAT stock touched 52 week highs, or a level not seen since April 2012. Why? The chart below which shows Caterpillar dealer retail sales by region surely has something to do with it. With global sales sliding again now that the third consecutive dead cat bounce is over, and dumping the most since February of 2013 or 12% from a year ago, when sales had in turned dropped 11% from 2012, driven by a collapse in Asian-Pacific, Latin American and EMEA sales, all of which crashed by more than 20%, we can only assume the company is well on its way to an epic collapse in its top and bottom lines as well.

And since this is nothing short of the bizarro, insane new normal, it is only a matter of time before the crash in retail sales sends the stock to plus infinity.


View the original post at ZeroHedge.