As mentioned quite a few times, despite the broad index movement, this rally has truly been concentrated on cyclical groups since the turn of the year. Perhaps no company represents cyclical more than Caterpillar (CAT), certainly within the industrial space. As you can see from the chart below the stock took off at the turn of the year and simply has not looked back despite a bevy of secondary indicators indicating extreme levels of overbought. There is a relentless asset allocation trade going on here, which seemingly is ignoring traditional levels of excess in this group of stocks.
On a fundamental basis the company continues to stand as one of the best purveyors of the ultimate global multinational with all the benefits of tax rate arbitrage, global labor arbitrage, emerging growth spending (government and private sector), etc. The company yet again smashed estimates ($2.32 v $1.73) on very impressive 35% sales growth (inclusive of the Bucyrus acquisition). Guidance for 2012 was also raised. CAT continues to hit on all cylinders.
- U.S.-based Caterpillar reported net income of $1.55 billion, or $2.32 per share, up from $968 million, or $1.47 per share, in the same quarter last year. Revenue increased 35% to $17.24 billion. Analysts polled by FactSet expected a profit of $1.76 per share on $15.95 billion.
- Caterpillar expects a 2012 profit of $9.25 per share and $68 billion to $72 billion in revenue. Analysts expect a profit of $9.07 per share on $66.99 billion in revenue.
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog