Rare Optimism from Caterpillar’s CEO
The recession has been tough on companies like Caterpillar (CAT). The heavy equipment maker has slashed production and cut thousands of jobs. Investors have seen Caterpillar shares lose half their value since the downturn began.
So it’s an important day when we hear some optimism from Caterpillar’s management team. When the firm reported second quarter earnings on July 21, chairman and chief executive Jim Owens issued this statement:
There is still a great deal of economic uncertainty in the world, but we are seeing signs of stabilization that we hope will set the foundation for an eventual recovery. Credit markets have improved significantly. Fiscal policy and monetary stimulus have been introduced around the world, and we are seeing signs, particularly in China, that they are beginning to work. In addition, we’ve seen many key commodity prices increase from their lows in the first quarter, and they are holding in a range that is usually positive for investment.
To review, those are a surprising array of reasons for hope: Credit markets are better, presumably helping Caterpillar’s customers get financing for equipment purchases. Government efforts to revive the economy might be working, especially in China, and may support spending on infrastructure. The recovery in commodity prices is apparently giving Caterpillar’s customers — in mines or oil fields, for example — the confidence to buy again.
Shares of Caterpillar jumped 7.7% on July 21, the day the news was released. Despite falling 66% from a year ago, Caterpillar’s profits were called impressive by analysts. The firm earned 60 cents per share, beating Wall Street analysts’ expectations of 22 cents per share.
There are still plenty of concerns about Caterpillar. Execs warned the third quarter of 2009 could be weak. Owens is seeing “signs of stabilization,” but not recovery. The housing industry remains weak as do other industries that are key users of Caterpillar products.
Despite this, Owens’ willingness to show a little optimism was a welcome sign.
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