Caterpillar To Present At JPMorgan Conference Tuesday: What To Expect

Caterpillar Inc. CAT will be presenting at J.P. Morgan's annual Aviation, Transportation, and Industrials Conference in NYC on Tuesday, March 8, at 2:30pm ET.

JPMorgan analyst Ann Duignan said attention is likely to focus on management's commentary on regional and end market demand.

In January, management lowered its overall fiscal 2016 revenue guidance to $40 billion - $44 billion (down about 10 percent at the midpoint) and provided initial EPS guidance of about $4.00/share (ex-restructuring charges).

In addition, it provided segment revenue guidance of Construction Industries down 5-10 percent (implies about $15.3 billion); Resource Industries down 15-20 percent (implies about $6.2 billion); and Energy & Transportation down 10-15 percent (implies about $15.7 billion).

Following are the key questions from JPMorgan (emphasis author):

• "You noted recently that CAT almost always see a drop in sales from the fourth quarter to first quarter of about 12 percent as the fourth quarter tends to be a strong selling season for the company (as does Q2). And we would expect, as we move into 2016, that the quarterly seasonality is much more aligned with historical 2014 and previous years than what we experienced in 2015. Does this suggest at a 30 percent decremental margin that EPS for Q1 at $1.02 is too high? Also, only about $9 billion of CAT's backlog is expected to ship in 2016, down 37 percent YoY. Should we be concerned about your revenue outlook?"
• "CAT Financial Services 2015 10-K noted CAT as both a potential lender to the financial arm and counterparty to a support agreement that requires it to remain sole owner and make payments to CAT FS in order to maintain certain financial ratios in the event rating downgrades or economic conditions render debt markets unavailable. Can you describe this relationship? How these commitments could play out in a stress situation? Also, provisions for credit losses declined in 2015. Why?"
• "CAT has spent about $1.55 billion on restructuring since 2013, including $1.2 billion in employee reductions and $216 million of asset impairments. Can you provide details about these restructuring actions and provide some indications about areas of additional focus for further actions?"
• "You made several tuck-in acquisitions in 2015, including Rail Product Solutions and RDS manufacturing. Can you discuss the products/capabilities these companies bring to CAT?"
• "Can you provide some color on your outlook for 2016 and how segments are trending today relative to that guidance?"
• "CAT announced its exit from the vocational truck market. When Caterpillar launched its first vocational truck in the North American market in 2011, it worked with Navistar on the product's design and build. Last year, the company announced its intention to begin independently designing and manufacturing its vocational truck products at the Caterpillar plant in Victoria, Texas. What's behind this decision?"
• "CAT has announced a number of leadership changes. Have you made any changes to compensation? Do you still use market share? If yes, why?"

Caterpillar shares have outperformed year-to-date (up 9.46 percent versus. S&P 500 down 2.5 percent). They were currently up 2.5 percent at $$74.70.