Before the open on Monday 10/22/12, Caterpillar (CAT) reported earnings for the third quarter of 2012. The beat of expectations contained a few one-time items and when we back out the options expense we see that the company beat expectations by $0.06 or about 2%.
While CAT is a Zacks #5 Rank (Strong Sell) there are still lots of things we can learn from the conference call. So a quick review of what was said on the CAT conference call: 1. dealers stating they have too much inventory, 2. 2/3 of lower guidance is due to construction and 1/3 for mining and power systems, 3.Europe is going to be weak and China won't see growth until new year.
The 800 lb. gorilla in the space is a Zacks #5 Rank (Strong Sell), so it is not too surprising that most of the names in the group do not carry the coveted Zacks #1 Rank.
Let's start with Zacks #3 Rank (Hold) Terex (TEX) which is more focused on cranes and aerial work platforms than the monster earth moving vehicles that CAT makes. Since construction isn't that much of a concern and they have limited exposure to mining and power systems the weakness from CAT may signal that a buying opportunity for TEX.
Over the last three quarters, TEX has shown some outstanding earnings momentum. Starting with a $0.01 beat in the December 2011 quarter, the company has delivered strong beats on an absolute and percentage basis. The March 2012 quarter saw a beat of $0.06 or 26% ahead of the Zacks Consensus Estimate.
The most recent quarter was a blowout, with the company reporting earnings of $0.75, or $0.26 ahead of the Zacks Consensus Estimate. The beat of 53% was a big driver for the stocks 27% move the following day.
Now the company is slated to report again, and analysts may be a little low with their expectations. In the most recent quarter, analysts were expecting $0.49 and now they are looking for $0.50. When we look back to last year, we see that the company had a solid beat of $0.08 or 36% ahead of the Zacks Consensus Estimate in the third quarter of 2011.
Terex is slated to report earnings on 10/24/12 after the close with its conference call being held the following morning.