Caterpillar's Warning Moves Industrial Stocks
Shares of Caterpillar Inc. (NYSE: CAT) spiked down and were halted mid-day following the release of an 8-K containing the company’s slideshow presentation to be presented at the Credit Suisse Industrials Conference.
The slides detail that, while Caterpillar anticipates over $2 billion in cost reductions during 2016 and a consensus 2017 revenue estimate of $38 billion as a “reasonable midpoint,” it sees fiscal year 2017 EPS of $3.25 as “too optimistic considering expected headwinds."
The company listed three significant operating headwinds:
- Sales of $38 billion is $1 billion lower than 2016 outlook (variable margin headwind of $350 to $450 million)
- Short-term incentive compensation for 2017 at $500 to $600 million higher than 2016
- “Cat financial unfavorable ~100 million”
Following the news, other industrials spiked lower in sympathy before gaining back, such as Terex Corporation (NYSE: TEX), Deere & Company (NYSE: DE), AGCO Corporation (NYSE: AGCO), CNH Industrial NV (NYSE: CNHI) and Cummins Inc. (NYSE: CMI).
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