On June 7, Caterpillar, Inc. presented at J.P. Morgan’s Diversified Industries conference. Throughout the press conference they touched upon their phenomenal 1Q11 results and then led into their forward looking numbers for the rest of 2011. The company revised their outlook for total revenue from above $50 Billion to $52-$54 Billion. For EPS, they revised from around $6.00/share to $6.25-$6.75 per share.
In the Q&A section, the first important note that came out is that CAT’s issue in China is not for demand but capacity. Investors were beginning to become concerned with increasing competition from Chinese companies, specifically Komatsu. CAT stated that the competition is not the issue, whereas capacity is. Throughout the press conference, they continually spoke about supply constraints in China and commented that most dealers in China would like more inventories if possible. They discussed plans of significant expansion of capacity in Xuzhou, China to come by 2015 so that they will be able to meet the high demand that they are seeing. As for other emerging markets, they feel that competition will continue to grow but that they are positioned well to handle this. As the developed company they are, CAT feels that their ability to produce top of the line products, while providing the fast, efficient service line behind their products provides them with a competitive advantage in the coming years. The second notable topic discussed was concerning the statistics that showed slowdown in economic growth. The company would not specifically comment on this, but they continued to press on that demand is not an issue. The last discussion was concerning the acquisition of EMD, which is one of the leading producers of locomotive technology. CAT feels that this is a great acquisition as locomotive transportation becomes prominent in emerging nations due to the fuel efficiency and effectiveness. EMD is a company known for producing top of the line products, but their distribution ability is what constrains them. CAT believes that the combination of EMD's products with their distribution capabilities will give them the competitive advantage to gain a big market share.
Following the press conference, CAT is trading up $.38. I believe that CAT is making strong moves to meet their long-term growth plans by 2015, assuming there is no recession. With their acquisition of EMD, pending acquisitions of MWM and Bucyrus, as well as expansion of facilities in the U.S. and around the world, CAT is becoming more competitive and responsive to all market needs.
Jeremy Pellizzari
No comments:
Post a Comment