Caterpillar (CAT), the famous maker of heavy equipment, was down over 7% in afternoon trading at the time of this writing. Volume of shares traded will end up being way above the norm once today's session is in the history books. The fourth quarter apparently didn't satisfy the market.
Except it should have, at least in my opinion. According to the press release, on an adjusted basis, the company made 41 cents per share. Earnings.com says analysts wanted to see 28 cents per share. Not only do we have that as a positive, but cash from operations jumped significantly to $6.3 billion in 2009 from $4.8 billion in 2008.
I'm not saying Caterpillar's quarter was the prettiest thing you've ever seen. No way. The economy has caused a lot of depressing declines for the business.
But guidance calls for an increase in sales in 2010. Management expects conditions to become more attractive as we get further away from the awful recession.
It's all about expectations, though. According to this Reuters piece, the company's call for $2.50 of per-share profit for the next fiscal year is way below projections of $2.71 per share. Oh, and the dreaded whisper number of $3 per share isn't helping things, either.
Well, I was bullish on Caterpillar back in October. I still am. When I look at the cash flow, and I consider the improving financial environment, I see opportunity for the company. Comparisons will most likely get easier, and there probably will be room for management to go beyond expectations.
Technically, the stock is challenged, you shouldn't think otherwise on that count. So, as a trade, Caterpillar wouldn't constitute a fun time.
However, with this stock, you get a 3% dividend yield, a solid brand name, and a good generator of cash flow. Caterpillar has pulled back from its 52-week high, making its shares worth an examination.
Disclosure: I don't own any company mentioned; positions can change without notice.
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