Caterpillar Still an Attractive Investment
We're meaningfully reducing our fair value estimate for Caterpillar, but we have confidence in the management team's long-term vision.
Scott Pope: Caterpillar came out with its fourth-quarter earnings this morning, coming in at $0.44 below consensus EPS. More importantly its guidance for 2019 EPS was both below our estimate and below consensus. The principal problem in Q4 was a lower margin in its construction industry segment and to a lesser extent, there was some onetime charges to the financial services segment. Taking these factors into consideration, we are anticipating a meaningful reduction in our fair value estimate.
The four major takeaways from the earnings call this morning were, one, the U.S. economy looks strong for 2019, which supports healthy growth in Caterpillar's construction segment; two, Latin America was rather weak in Q4, and the recovery looks tepid; three, China was a little weak, and going forward we think that China revenue growth will be flat in 2019; and fourth, minor CapEx is expected to be strong in 2019 which would support healthy growth in Caterpillar's resource industry segment.
Scott Pope does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.