Good News Starts with Caterpillar - Analyst Blog
January 26 2012 - 4:45AM
Zacks
The deluge of this morning’s favorable economic and earnings
reports should help stocks sustain Wednesday’s Fed-inspired gains.
We got positive weekly Initial Jobless Claims numbers and a
better-than-expected Durable Goods Orders reading. On the earnings
front, Caterpillar’s (CAT) blowout results will
likely ease some of the lingering concerns about weakness in China
and other emerging markets.
Of this morning’s economic releases, the most important number was
the roughly in-line Jobless Claims reading, showing a gain of 21K
to 377K. Please recall that we saw an unusually big drop last week,
likely resulting from complications in seasonally adjusting the
data at this time of the year. Today’s reading goes some way
towards correcting that. The four-week average, which smooths out
the week-to-week fluctuation, dropped by 2.5K to 377.5K,
maintaining its downtrend of recent weeks.
In other economic releases, the December Durable Goods Orders
report came in better than expected, highlighting that corporate
capital expenditures will remain a growth driver for the economy
despite the expiration of accelerated depreciation expense.
Headline Durable Goods Orders increased 3% in December, above the
2% consensus expectation, while the November headline gain of 3.9%
was revised upwards to 4.3%.
The ‘core’ Durable Goods Orders reading -- which strips out defense
and aircraft orders given their inherent ‘lumpiness’ on a
month-to-month basis -- also came in better than expected at a gain
of 2.1%. This compares to the weak ‘core’ reading in November of a
1.2% drop.
On the earnings front, Caterpillar beat big, blowing past
expectations and coming out with Apple-like numbers. Driving
Caterpillar’s record quarterly results was continued resilient
demand for the company’s products in international markets, which
should help ease some of the concerns about slowing demand in key
emerging markets.
Importantly, the company guided higher, both for revenue as well
earnings, which should help cause positive estimate revisions in
the coming days. 3M (MMM) beat on EPS and
revenue, with strong demand in industrial and transportation
end-markets offsetting weakness in consumer electronics.
Eaton Corp (ETN), another diversified industrial
operator, missed both EPS and revenue expectations.
AT&T (T) missed consensus EPS by a penny,
though its revenue came out ahead of expectations. The company had
a number of one-off items, including termination fees for the
failed T-Mobile deal. The EPS miss notwithstanding, the company had
an overall good report in terms of new smart-phone subscribers,
cash flows, and share buyback plans.
Netflix (NFLX) came out ahead of expectations
after the close on Wednesday as the company was able to reverse the
impact of its recent mis-steps by making strong subscriber gains.
Starbucks (SBUX) reports after the close
today.
CATERPILLAR INC (CAT): Free Stock Analysis Report
EATON CORP (ETN): Free Stock Analysis Report
3M CO (MMM): Free Stock Analysis Report
NETFLIX INC (NFLX): Free Stock Analysis Report
STARBUCKS CORP (SBUX): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
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