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CAT & Others Offset Apple Miss

Sheraz Mian

We have the usual headlines out of Europe this morning: pointing to ‘unsustainable’ government bond yields in Spain and Italy, falling business confidence in Germany and a negative GDP print in the U.K. But the key driver for today’s trading action will likely not be those European headlines, but the slew of earnings reports from a handful of bellwethers.

Apple’s (AAPL) surprise earnings miss will be a major drag in Tech today, but I find the resilient results from Caterpillar (CAT) this morning to be far more reassuring.

Apple did cite economic weakness contributing to its miss, but the consensus takeaway appears to be that consumers are holding out for the next version of the iPhone which is expected to come out a few months later. I am somewhat skeptical of this narrative, but have no basis to outright reject it. Given the tech giant’s enormous weight – it single-handedly brings in about a fifth of the Tech sector earnings – the ‘miss’ will have a bearing on aggregate second-quarter earnings numbers.  

Apple aside, the earnings reports this morning Caterpillar and others like Boeing (BA), Ford (F) and Pepsi (PEP) are quite favorable. The Caterpillar report is particularly positive, as they not only handily beat earnings and revenue expectations, but also provided reassuring commentary about the coming periods.

The company did lower the high end of their full-year 2012 revenue guidance range (from $68 - $72 billion to $68 - $70 billion), citing “weaker economic conditions in much of the world and about $1 billion of negative currency impacts,” but the stock was priced something far more negative.

Bottom line, this morning’s reports from Caterpillar, along with Boeing, Ford and Pepsi would qualify as positive earnings releases. These may not be enough to offset the impact of Apple’s miss, but the damage likely would have been greater without them.

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