Caterpillar GIves Up Gains After Earnings

Caterpillar gapped higher on Wednesday after the company released its fiscal second-quarter earnings and raised its profit guidance. The company, however, lowered the upper range of its sales guidance. The stock has been falling throughout the session and has since turned negative, giving up substantial early gains. Caterpillar reported net income of $1.699 billion from $1.015 billion in the previous year. On a per share basis, the company earned $2.54 versus $1.52 in last year's corresponding quarter. This came in well ahead of analysts' consensus estimates of $2.28. Total sales and revenues for the quarter were up 22 percent to $17.37 billion. This also came in ahead of Wall Street revenue expectations of $17.11 billion. Excluding revenues generated by acquisitions, the company's sales were up 12 percent. Looking ahead, Caterpillar said that it expects a full-year profit of $9.60. This compares to a prior outlook of $9.50. Revenues for the fiscal year are now expected to be between $68 billion and $70 billion. This compares to the previous outlook of $68 billion to $72 billion. Currently, Wall Street analysts have consensus earnings per share estimates of $9.54 on revenues of $69.52 billion for the fiscal year. The action in the stock is likely due to the lower revenue guidance range as well as continued negative sentiment surrounding the name. Year-to-date, CAT has fallen almost 11 percent and is sitting near new lows for 2012. In recent months, the stock has been making a series of lower lows and lower highs, a bearish technical pattern. Caterpillar is seen as one of the most important cyclical stocks in gauging the health of the global economy. Fears surrounding the stock center on the European debt crisis, with many EU countries already experiencing recessions, as well as worries about a hard landing in China. As one of the leading industrial names in the world, traders and investors frequently use the stock as a vehicle to express an either bearish of bullish view on the macro economy. The stock opened the session right at the 50-day moving average around $85.00. The strong rejection of price at this level suggests that the 50-day could continue to be a resistance point in the name. A clean break of this level to the upside, could potentially be a buy point if the stock is able to recover. Currently, CAT is trading around 5% below the 50-day moving average after today's gap higher and subsequent plunge.