Morgan Stanley Maintains on Caterpillar

In a report published Tuesday, Morgan Stanley analyst Thomas Robb maintained an Equal-weight rating on Caterpillar CAT, with a $86.00 price target as a 4Q13 earnings preview suggests. According to the report, analysts call for a $0.05 miss vs. cons in 4Q13 ($1.23 MSe), driven largely by weaker results within Resource (persistent inventory troubles) and Power Systems (dealer stats declines). Their waterfall suggests a $4.50-6.50 2014 guidance range. “We forecast $1.23 EPS, $0.05 below cons,” the report noted. “This is predicated on $12.95bn MP&S revenue ($13.71bn total), down 16% Y/Y, largely due to continued challenges in Resource. Here, we forecast a 50% Y/Y revenue decline as we believe that inventory remains too high in Asia Pac, augmenting weak end user demand. We forecast 8% growth in Construction on the back of improving end market commentary. In Power Systems, we project 4% growth – below management guidance, but dealer stats were -5% for 3m/3 Nov. At the MP&S margin line, we forecast 260bps Y/Y expansion to 12.1%, as CAT's margins were negatively impacted by sharp inventory reductions during 4Q12.” Some risks from the report include mining companies announce further cuts to CapEx, China data decelerates further and inventory issues persisting or worsening. CAT Closed Friday at $90.35 with shares trading down at 1.18 percent.
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Posted In: Analyst ColorReiterationAnalyst RatingsMorgan StanleyThomas Robb
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