Commodities: A Return Visit To Earlier Stories: It’s Up From Here For Caterpillar — Barron’s

   (FROM BARRON'S 10/26/15) 
   By Jack Hough 
 Stock Market Quotes, Business News, Financial News from http://commodities-report.com

Thursday’s 2.8% gain for Caterpillar bodes well for shareholders. It followed an earnings report that contained scant good news, and suggests the bar is set low enough to offer upside from here.

We were early to bottom-fish Caterpillar’s shares in August at $77, down from a 2012 peak of over $115 (“The Cat Will Snap Back,” Aug. 10). They recently changed hands at $72.

Third-quarter revenue fell to $11 billion from $13.5 billion a year earlier, and earnings per share plunged to 75 cents from $1.72 excluding restructuring costs. Both numbers missed estimates. About the only bright point was that management didn’t further cut its revenue guidance for this year and next.

As we noted in August, business conditions for Caterpillar have turned broadly brutal, particularly in mining and energy, and construction in China and Brazil. Earnings are expected to bottom next year at $3.71, and shares trade close to their historical trough multiple of 20 times. That’s well above the $2.18 recorded at the last bottom in 2009. The next peak could be higher, too, than the $8.48 a share in 2012. That year, Caterpillar was caught short on production capacity because it had cut too deeply during the downturn. In the current slump it has kept capacity intact. The next peak could top $10 a share. A typical peak multiple of 13 times could get shares to $130. And a 4.3% dividend yield makes the wait worthwhile.

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   (FROM BARRON'S 10/26/15) 
   By Jack Hough 
 

Thursday’s 2.8% gain for Caterpillar bodes well for shareholders. It followed an earnings report that contained scant good news, and suggests the bar is set low enough to offer upside from here.

We were early to bottom-fish Caterpillar’s shares in August at $77, down from a 2012 peak of over $115 (“The Cat Will Snap Back,” Aug. 10). They recently changed hands at $72.

Third-quarter revenue fell to $11 billion from $13.5 billion a year earlier, and earnings per share plunged to 75 cents from $1.72 excluding restructuring costs. Both numbers missed estimates. About the only bright point was that management didn’t further cut its revenue guidance for this year and next.

As we noted in August, business conditions for Caterpillar have turned broadly brutal, particularly in mining and energy, and construction in China and Brazil. Earnings are expected to bottom next year at $3.71, and shares trade close to their historical trough multiple of 20 times. That’s well above the $2.18 recorded at the last bottom in 2009. The next peak could be higher, too, than the $8.48 a share in 2012. That year, Caterpillar was caught short on production capacity because it had cut too deeply during the downturn. In the current slump it has kept capacity intact. The next peak could top $10 a share. A typical peak multiple of 13 times could get shares to $130. And a 4.3% dividend yield makes the wait worthwhile.

To subscribe to Barron’s, visit http://www.barrons.com/subscribe