Market Overview

Are Raised Outlooks a Bullish Sign for Caterpillar?

Heavy equipment manufacturer, Caterpillar (NYSE: CAT) will report its first quarter earnings next week. The company is often seen as an indicator of the state of the economy, as the heavy equipment orders tend to correlate with the industrial production activity.

Last week, a smaller industrial firms, such as Wabtec (NYSE: WAB) and Tractor Supply Co (NASDAQ: TSCO) guided their quarterly and annual earnings higher than expected. This could indicate that the demand for heavy machinery is higher than the analysts were expecting, which is a bullish sign for Caterpillar.

Benzinga spoke with an Edward Jones analyst, Jeff Windau, who has a Hold rating on Caterpillar. He noted that the raised guidances are obviously positive signs, but China is still a big question. Windau also pointed out that mining companies, who are Caterpillar's large customers, have still been under slight pressure. According to Windau, the draggin construction industry is also a concern, but the fact that the machinery fleet in the US si fairly aged could force Caterpillar's clients to purchase new equipment.

Traders who are expecting CAT earnings to beat the street estimates might want to consider going long the stock, SPDR Dow Jones Industrial Average ETF (NYSE: DIA), or Select Sector Industrial SPDR ETF (NYSE: XLI).

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