Wrong Again?

Michael Panzner
updated | Author's Website

According to one global manufacturing powerhouse, the outlook for 2012 is pretty rosey.

“There Won’t Be a Global Recession, Caterpillar Says” (TheStreet)

Don’t worry about a global recession. Caterpillar says it won’t happen in 2012.

In an eventful week in which Apple surprised the world with outsized profit and sales gains, and the Federal Reserve said it would keep interest rates low for at least another three years, Caterpillar’s results sneaked up on investors. The construction-equipment maker blew past earnings and revenue targets with its fourth-quarter results, raising its outlook for 2012 in the process.

“I’m surprised as well,” says Oliver Pursche, president of Gary Goldberg Financial Services. Pursche manages the GMG Defensive Beta Fund, which counts Caterpillar as a top holding. “It’s a positive surprise. We added to the position when it pulled back in the fall, but I don’t think anyone can say they believed this would happen.”

The best news in Caterpillar’s report was the global company telling investors not to worry about another global recession, despite enduring questions over Europe’s debt crisis and its effect on global growth in 2012.

“The eurozone public debt crisis has been a lingering negative, but it is unlikely to trigger a worldwide recession,” Caterpillar said in its release Thursday. The company says the risk of a global recession has “diminished significantly” over the most recent quarter, although Caterpillar noted concern that central banks could slow economic growth if they raise interest rates prematurely.

Caterpillar enjoyed an improvement in sales volume in all geographic regions in nearly all of its business segments, driven by end-user demand.

“Any which way you slice it, the reality is that even if you have some softness in the economy this year and there is a slack in demand, the rate of which the world is growing, the infrastructure theme is more than alive and well in the long-run,” Pursche says.

Unfortunately, you can’t assume that the company knows what it is talking about. Here is what they had to say following the release of their quarterly results exactly four years ago:

“Caterpillar Affirms 2008 Outlook” (USA Today)

Construction-equipment maker and economic bellwether Caterpillar Inc. said Friday that it expects resilient overseas economies to drive strong sales and profit growth this year, even as the United States teeters toward recession.

Caterpillar Chief Executive Officer Jim Owens said strong economic growth outside the United States would offset weak domestic demand.

“Global markets for mining, energy and infrastructure development are booming,” he said in a statement.

Caterpillar expects U.S. economic growth to slow to 1 percent this year, including continued weakness in home construction.

The company is predicting profits will grow by 5 percent to 15 percent in 2008, and sees revenue rising 5 percent to 10 percent year-over-year. The prediction implies 2008 profit of $5.64 to $6.18 per share on revenue of $44.06 billion to $46.16 billion.

“While we expect anemic growth in the U.S. economy, we continue to see positive conditions for our sales in most of the rest of the world,” Owens said.

Of course, we know what happened after that. We saw the worst global economic downturn since the Great Depression (and Caterpillar’s share price didn’t fare particularly well, either).

Cat4yearsago

Remember, even those who are at the economy’s front lines don’t always see the forest for the trees.

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