Zacks Analyst Blog Highlights: Caterpillar Inc., Terra, CF Industries, CastlePoint Holdings and Tower Group announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Caterpillar Inc. (NYSE: CAT), Terra Industries (NYSE: TRA), CF Industries (NYSE: CF), CastlePoint Holdings (NASDAQ: CPHL) and Tower Group (NASDAQ: TWGP).

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Here are highlights from Tuesday’s Analyst Blog:

Caterpillar Misses Badly

Caterpillar Inc. (NYSE: CAT) is the market leader in construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Caterpillar is also a leading U.S exporter, with more than half of its sales coming from outside the United States. The company organizes its operations in three principle lines of business, which includes machinery, engines, and financial products.

CAT reported fourth quarter EPS of $1.08, well below our expectations of $1.36, due to sharply higher machinery and engine costs, sluggish machines revenue growth, and an unfavorable currency movement. Essentially, the company was not able to reduce operating costs quickly enough to adjust for the lower level of output. Also, SG&A and R&D costs were higher by $279 million to support new product programs and growth initiatives.

CF-Terra Deal Far from Done

Recent information is indicating that the acquisition of Terra (NYSE: TRA) by CF Industries (NYSE: CF) is just a proposal that is far from complete. CF has proposed the transaction, and Terra has not yet responded.

CF has not bought Terra yet and the potential ownership of the new company being 53% with CF Industries shareholders and 47% with Terra shareholders may be premature. This proposed acquisition may have many more unusual developments in the near future.

CastlePoint Holdings Downgraded

Considering the intraday price of $13.45 per share, we are lowering our recommendation on the shares of CastlePoint Holdings (NASDAQ: CPHL) to a Hold from a Buy. Our action is in response to the approximate 30% increase in the share price since our December 1, 2008 report and the limited upside potentially if acquired by Tower Group (NASDAQ: TWGP).

We have adjusted our FY08 and FY09 earnings expectations to $1.32 per share and $1.95 per share, respectively, from $1.38 per share and $2.00 per share previously. At the intraday price of $13.45 per share, the shares of CastlePoint trade at 1.34x the 3Q08 book value of $10.04 per share.

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