By: Rob Wertheimer 

CAT’s 30% earnings beat and $2.00 guidance range in 1Q are why we focus on the direction of revenue, and why we keep writing on the theme that CAT is coming off a record trough, uniquely so among machinery stocks. Quarterly earnings are volatile and not terribly predictable. What is somewhat predictable is potential, and what would be normal earnings if potential is achieved. On revenues, CAT was at record lows in most of its divisions. Our fleet work shows these are not only record lows, but record lows on fleets that are old. So when demand in the end markets turns strong, and fleets need to both expand and replace a prior peak that was higher than today, the results can be explosive.

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