Caterpillar 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Construction sales were down, dealers lowered inventory

“for construction industry, sales were down $98 million, the profit improved a $194 million or about 67%. Now for sales on the plus side construction had positive price realization. On the downside, volume was little lower and most of that was from dealer inventory reductions as dealers lowered inventories a little more in the third quarter of this year than they did in the third quarter of 2013 for construction.”

Lower demand in Asia/middle east, better demand in US, small improvement in Europe

“We also had little lower demand throughout most of Asia including China and weakness in the Middle East and in the CIS. On the plus side demand was up in North America and we had a small improvement in Europe.”

We’re still positive on 2015

“As we look towards 2015 from an economic perspective, we think there is a reasonable likelihood the world economic growth can improve that in 2015. In the developed countries, growth-oriented monetary policies we think could support continued modest improvement.”

Chinese government has slowed growth

“the Chinese governments push from structural reform has slowed growth some and the ongoing uncertainty around the direction and timing of fiscal policy and monetary policy in the U.S. could temper business confidence. ”

Just because inventories go up or down doesn’t mean a whole lot

” just because inventories go up or down doesn’t mean that they’re – themselves that doesn’t mean that it’s well managed or poorly managed. There are lot of seasonal impacts that go on during the year in construction”

Rundown of construction around the world

“In terms of construction, it’s a mix bag around the world. We tend that we live in the U.S. and we get influence by what we hear in the U.S. a lot and it’s been actually pretty positive, it’s been quite a bright spot although, I wouldn’t make the pitch that allow us better that doesn’t mean it’s great. We are I guess 7 to 8 years now past where the peak was and that was ‘06 and ’07. So, we still have a ways to go to get to where we would think it’s really good but it has been better. Other parts of the world it’s a little bit of a different story. China has been week, our share there has been pretty good and rising but that doesn’t offset a weaker industry.

Europe has been flat to slightly up for us which I think is a surprise to a lot of people but again you kind of have to think back to where it’s come from and how low it got. My comment about U.S. not being back to peak goes even more so for Europe, there is a lot of room for Europe I think to improve; they can ever get economic growth kicked back in there.”

Obviously watching oil prices pretty closely

“I just want to add here its Doug here again. We are obviously watching oil and gas prices very closely. We are talking to, trying to stay close to our customers on this and what they’re saying and I think you’re seeing their quarterly announcements come out and generally the feedback we’ve been getting that say 80 to 90 somewhere in there on a sustain basis. Certainly we’ll take that really educated top half of it but there is plenty of room for reinvestment like Mike said it’s still where it was a couple of years ago.”

“I think you see low 70s on a sustain basis, there would be a chill cross the market and I’d say gas coming down below three substantially on a sustain basis may do that as well. ”

Election in Brazil this weekend

” I’m also optimistic in Brazil although there is election there at this weekend but both candidates, both parties are talking about reflecting the economy and Brazil is always used infrastructure as a way to do that.’

Inventories are basically back where they started

“I think this year if you look at dealer inventory changes I mean there have been changes by quarter, but by in large they’re likely to end the year about where they started.’

We see flat to up next year

“I think that’s the case for all of our — I mean this is worldwide comment but for all of our segments. We said flat to slightly up next year and we don’t see either energy or transportation, construction or resource industries being kind of far from that. It looks pretty flat up a little for much of the business”