Caterpillar Inc. Dealer Survey highlights mixed results in the US and a downturn in the Overseas business. Credit Suisse’s Jamie Cook maintained an Outperform rating for the company, while raising the price target from $72 to $87.
Caterpillar’s performance during 1Q16 appears to be on target, according to 90 percent of the dealers surveyed. For 1Q, there seems to be “typical seasonality,” with a sequential improvement in performance every month and March being the strongest month in the quarter.
Mixed Results In US
Dealers along the East and West coast, especially the Building Construction Products, or BCP, dealers continue to witness strong demand, and in most cases demand is surprising on the upside, analyst Jamie Cook mentioned. He added, “This is being driven by residential, commercial construction and in some instances roadwork.” Dealers along the coastal areas expect demand to rise 5-10 percent.
For dealers in central US, non-commodity exposed demand is largely flattish. Dealers in the Gulf coast region are witnessing a 10 percent decline in demand.
Overseas Performance
“China is surprising on the upside but is not viewed as sustainable driven by a pre-buy ahead of emissions,” Cook wrote. In Indonesia, both mining and construction have been down double digit, with no improvement in the aftermarket. Saudi is also down in the double digit range.
“The Middle East on the margin is worse in the Emirates, in particular Dubai tied to oil although 2017 could be up,” Cook noted. Europe is witnessing single digit growth in demand, while Brazil is down 15-20 percent and Canada is mixed.
Estimate Changes
The EPS estimate for FY17 has been reduced from $4.05 to $3.75, in-line with dealer commentary. The EPS estimate for FY18 has been raised from $5.80 to $5.95, with dealers have started talking about the trough, the Credit Suisse report stated.
Read more: http://www.benzinga.com/analyst-ratings/analyst-color/16/04/7795763/new-caterpillar-dealer-survey-means-stock-is-worth-almos#ixzz45cp4HILx
