The problem with cyclical stocks like Caterpillar (NYSE:CAT) is that investors and analysts inevitably forget about the "cyclical" part and get way too giddy when times are good. That, in turn, leads inevitably to expectations beyond the level these companies can achieve and, when misses start accumulating, sell-offs in the stock. Such would seem to the be the case after CAT's second quarter results. The results indicate that business continues to be quite strong, but the reaction to those results shows that enthusiasm in the bull camp had previously jumped the fence and ran amok.
So What Was Wrong with Q2 Earnings?
On the face of it, it's hard to be all that upset with the numbers Caterpillar delivered. Revenue rose 39% on a reported basis, and organic growth was in the neighborhood of 32%. Growth was led by the resource industries category, with 53% revenue growth, but even the so-called laggard, power, was up 32%. Interestingly, CAT is not seeing a lot of pricing momentum today - volume was up almost 31% for the quarter, but pricing was up only a little more than 1%.
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Caterpillar Hits A Pothole (CAT, TEX, DE, ETN, ITW, BWA, OSK)
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