Komatsu Beating Estimates And Raising Guidance, But Going Nowhere Fast

In my last article on Komatsu (OTCPK:KMTUY), I noted a growing rift between the performance of Komatsu as a company and the performance of its shares. Since then, the company has continued to execute well, handily beating expectations, but the shares have arguably still lagged what that performance should have earned. Komatsu’s local shares are up about 8%, while the ADRs are down about 8%, versus a 15% move in Caterpillar (CAT) shares, 3% moves at Deere (DE) and Terex (TEX), and a much weaker performance at Volvo (OTCPK:VLVLY) and Hitachi Construction Machinery (OTCPK:HTCMY).

I believe Komatsu is undervalued relative to what the market has typically paid for peak earnings, but I’m also concerned that demand for construction machinery in markets like North America isn’t likely to get much better, and that demand in Indonesia and across the mining sector could likewise soften from here. I see a trading opportunity here, but I’d be careful about not overstaying my welcome.

 

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Komatsu Beating Estimates And Raising Guidance, But Going Nowhere Fast