Capital Goods Decline on Caterpillar Earnings

Brittney Barrett |

The machinery maker, Caterpillar Inc. (CAT) fell short of Wall Street expectations today when it missed second quarter earnings. The news led shares sharply lower and inspired losses in many of company’s peers. Citing higher costs for the weakness, investors assumed similar companies would suffer the same plight for earnings.

Caterpillar, which focuses on creating equipment employed in construction and mining also pointed toward weaker-than-anticipated growth stateside and overseas, especially in China where anti-inflation measures have put the reins on economic expansion. Caterpillar’s earnings announcement was accompanied by updated full-year sales and profit forecast. The new range’s midpoint fell short of analyst predictions. Alongside the new forecast, shareholders observed a more wary tone than in previous releases, perhaps prompting greater share decline.

Commodities prices, including steel and copper have been rising. Compounding the strain, higher oil prices have made transportation a heavier burden and damaged costs. Several of these factors will have an impact on broad based earnings within the sector.

Shares of agricultural equipment maker, Deere & Company (DE) sunk following Caterpillars announcement. Prices for the stock have vacillated sharply in the last 52-weeks so investors are on edge, meaning the latest earnings report from Caterpillar is being seen as a signal Deere could also fall short of expectations. Deere will report its earnings on August 17 and as of today, technical indicators for the stock appear bullish.

Amcol International (ACO) also fell on Friday after suffering a similar fate to Caterpillar. Second quarter earnings beneath analyst expectation led Amcol to become the biggest loser in the sector today. The specialty minerals creator posted net income of $13.8 million, or $0.43 per share, a 14.3 percent loss on last year’s $16.1 million, or $0.51 per share.

Amcol said a 4.7 percent tax rate hike to 30.1 percent caused losses of 0.03 percent per share for total damages of $944,000.
Revenues at the company actually grew in spite of the losses, reaching $250.8 million or 13.6 percent higher than the year earlier period. Analysts had anticipated earnings of 56 cents on revenue of $256.2 million.

Gardner Denver (GDI) bucked the trend of the sector and gained significantly to a 52-week high. The company passed an 88.80 buy point from after the compressors and blowers maker flew past analyst expectations and announced an 85 percent spike in Q2 earnings and a 36 percent sales increase. Gardner Denver also bumped its annual EPS outlook to as high as $5.15 a share.

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Companies

Symbol Name Price Change % Volume
CAT Caterpillar Inc. 88.77 1.30 1.49 6,379,056
DE Deere & Company 85.35 1.49 1.78 3,157,773

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