By: Rob Wertheimer 

There have been few, if any downside revenue surprises as machinery rolls through 4Q reporting and outlooks. A China slowdown in CAT’s 4Q was widely anticipated, but the actual “downturn” thus far has been far less severe than most would expect. CAT expects China construction equipment to be more or less flat in 2019. For perspective, China industry sales of excavators were up 45% in 2018, 100% in 2017, and 25% in 2016, with the current level now 15% above prior peak. That sure sounds like a peak, or strong upcycle, and yet CAT and Volvo are guiding to only flat to down slightly, instead of down substantially.

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