Zacks.com releases the latest Analyst Interview. Today’s interview is with senior analyst Mario Ricchio, who discusses Caterpillar (NYSE: CAT).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=2678.
What are your expectations for machinery companies in your coverage?
Our expectations are very high for the second quarter. We anticipate the median second quarter EPS growth rate to come in at a healthy 20% clip. Strong international sales volumes, increased pricing power, and a weak U.S. dollar should fuel the profit gains.
The difference this time around, as opposed to other machinery cycles, is weak U.S. machine orders have failed to lead to a series of downward earnings revisions. And it’s really been a story of the booming global economy carrying the day. Since the companies we cover, in some cases, have more than 50% of earnings from international operations, they have been able to weather the storm called U.S. housing.
Unfortunately, we see the global decoupling ending within the next 6-9 months. International sales growth may fail to provide the same offset to weaker domestic market than it did in the last couple of years. So even if machinery companies report solid earnings growth this quarter and next, we believe it is already priced into the sector.
We believe the stock market is looking beyond the second quarter and paying much more attention to the outlook for 2009. Investors should focus all eyes and ears on management guidance. We believe the days of double-digit earnings growth are numbered. Our 2009 median EPS forecast calls for growth in the range of 2-4%.
We expect U.S. commercial construction activity to slow dramatically amid a weaker labor market, reduced discretionary spending, increased retail vacancy rates, and tighter credit conditions. The decline in U.S. construction spending is expected to negatively impact the companies in our coverage, such as Caterpillar (NYSE: CAT).
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks Profit from the Pros e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2679.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4581.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Contacts:
Mark Vickery
Zacks Web Content Editor
312-265-9380
Visit:
www.zacks.com
