Of Caterpillar are up 3% today,
on pace for its biggest gain since January.
The move comes after the industrial giant beat earnings per
share expectations for the sixth straight quarter,
posting a 15% year over year boost in sales.
Still, the brand reported a 7%
decline in construction equipment sales and a 10%
decrease in mining equipment from the prior year.
Let's dive in further here with Stephen Volkman,
machinery and industrial industrials analyst at Jeffrey's.
So Stephen, how did they do it if those two
key portion parts of their business,
construction and mining were, were down,
right. Hi, Tyler. So we knew those would be down.
So I guess that's part of the equation here.
But really what worked well was more the energy and
transportation business.
As you guys probably know,
they have a power Gen.
business. I heard you talking in the previous segment about
some of the sort of old economy power Gen.
and that is indeed what's helping Caterpillar.
A lot of this is for data centers,
but but other types of power Gen.
as well. Those were probably the offsets.
And then of course they did a really good job
with margin.
So this was kind of better performance of controlling what
they could control,
even though the end markets are choppy.
So internal cost control is really what you're talking about
there,
right? The cost of manufacturing,
they were able to bring that down South.
What does the future, what does the future look like
for this industrial giant?
Yeah. So I think the future is fairly bright here.
I mean, at the end of the day,
we're going through a bit of a soft patch here
across industrials.
But really Caterpillar is telling us and and everybody else
is kind of agreeing through earnings season that nothing is
falling off a Cliff,
nothing is getting meaningfully worse,
that we're sort of managing our way through this.
But you know, as we come out,
as we get some Fed rate cuts,
as we get the sort of mega project revenues kicking
in,
as, as we get into 25 and beyond,
I think you'll see more activity in mining.
I think think you'll see more activity and energy.
Those are both important markets for CAT.
And I think the infrastructure will support the construction side.
So I think things are going to look fairly good
once we get out of this soft patch.
It's reassuring, Steven, because we've,
you know, for years looked at this as a bellwether
of the global economy,
China in particular. What are we learning?
Yeah. So there's nothing really here at the margin that's
much different.
So China is fairly weak for them.
By the way, that's become a pretty small piece of
the pie for Cat in recent years.
Certainly. Well, less than 5%
of sales, even though we used to sort of think
of it as a as a China play,
right. But anyway, you know,
nothing, again, at the margin,
nothing's really changing dramatically. So it's not telling us a
lot about the economy.
But I think the most important thing it's telling us
is that we are not in
sort of this big downtrend,
that we're not sort of approaching a Cliff event,
a big recession in the industrial space.
And some, I think some investors may worry about that.
But but that is sort of Cat's telling us that's
not the case.
Is how much is CAT picking up from the infrastructure
spending that the Biden administration was able to get through
Congress?
That's helping at the margin.
But it really early days,
Tyler, because it takes a long time for these projects
to really get funded and for the funds to start
flowing.
They have to be designed.
There's environmental improvements. You have to hire people.
So this is going to be a multi year kind
of process.
It's starting now. Tip of the spear kind of thing.
But I don't think, well,
let me say it the other way.
I think you will see a lot more as we
get into 25 and 26.