CAT's competitor Komatsu warned its profit for this year will be a third less than they previously guided, well below analysts' estimates. They blamed a sudden, steep fall in global demand. Is it reasonable to think CAT and Finning could somehow avoid a similar fate? Komatsu releases results on January 29 while CAT releases results today.
It has already announced plans to lay off workers, cut executive compensation by up to 50% and implements a global hiring freeze. Much hope rides on President Obama's plan to dramatically increase infrastructure spending but such programs tend to go through a lengthy planning stage first. This is good for companies like Stantec (STN) but it takes time until the orders for the heavy equipment are made. from an article on the stimulus palns at www.amprogram.com
$825 billion is a lot of money, but not really when you compare it with the total US economy. We need to remember all of this is not going to infrastructure, and if it does in fact result in new equipment purchases it will be divided among several different heavy equipment companies. Personally, imo, we will be lucky if it starts up 10% of the machines that are parked now, let alone lead to new equipment purchases.
My take is that when that opportunity does arrive, CAT would be struggling to meet demand without employees that they let go. Yes, they can be rehired, because no one can relaly find a job in today's environment and they'll all be available ... almost all.
But if they have to retrain people, it could cost them some delay in filling orders, which in turn could get them premium rate for used equipment
actually 825 billion is a lot of money. Experts argue that up to 6% of it could go towards equipment purchase or rental costs. That would be about 50 billion ... give or take ... say a billion.
Even if the experts are wrong and only half of it goes towards equipment purchase, it is still 25 billion and say CAT gets a small 20% of it ... it is still 5 billion added to their sales. These are very conservative estimates ... I think CAT will benefit to the tune of 15-20 billion in sales.