Durable Goods, Household Employment and Caterpillar
- Posted by ToddSullivan
- on July 26th, 2012
The Advance Report on Durable Goods Orders came in this morning with a sharp rise to $221.6Bil or up 1.6%. The pattern of Durable Goods Orders vs. the Household Survey Employment series is shown in the chart below. This morning’s Advance Durable Goods report can be found at the link: Advance Report on Durable Goods (June 2012).pdf
As I have discussed many times, month-to-month economic data is always volatile due to the limits of statistical data collection. This data shows that the US economy remains in a strong uptrend and that employment should continue to rise in the coming 6mos-12mos. Note: This single report is very consistent with other key economic data and must always be viewed as part of the whole.
I find it impossible to agree with the pessimistic views so overwhelmingly proffered in the media. The ONLY direction I can see in this data is one of economic expansion.
It is very hard to be pessimistic when the actual “nuts and bolts” of the global economy are expanding!
First, business is good and expected to continue. This flies in the face of those fearing recession as CAT’s business truly reflects the basics of global economic trends. CAT implemented “Lean” mfg techniques in 2005. Mike DeWalt told me 2yrs ago that getting north of 28% Gross Margins was what I should see them do. They are now over 27% and climbing. Today’s release indicated 15% OpMargins when previous levels were in the upper single digits with highs at 12% at previous economic tops. You can justify improvement in the BV/Shr growth rate in the chart below.
If this continues to improve and we remain at 4xBV (currently 3.6xBV) then the stock should trade close to $160shr-180shr in 4yrs-5yrs respectively. Pricing as I discussed with you is dependent on market psychology and the best I can do is a very rough estimate.
Not only does $CAT results confirm the view that the global economy is expanding and that the overly pessimistic media recession pronouncements misplaced this report adds confirmation to $CAT ’s “Lean” implementation is adding to CAT’s Total Return for shareholders.
This is an issue which I recommend.
To see more posts on any of the companies mentioned in this article, enter their stock ticker symbol in the search box.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Todd's investing strategy is essentially long with the rare short. He seeks to buy undervalued issues with an upcoming catalyst that will help them realized.... More »
aapl acas ackman aig AN bac BAM BBI bgp BPO buffett CC CODi CRE davidson dow einhorn employment ETFC f fairx ggp hhc housing IGOI jcp jmba joe mbi mcd mgm MO oesx pld PM rail sbux seth klarman SHLD spg spy theory trade VIC xom
- Tuesday links: the secret of SEO | Abnormal Returns on The Private Economy is Doing Just Fine
- The Expansion and Employment | ValuePlays on Housing Thoughts & New Home Supply Sinks to 4.1mos
- Housing Bubble Hysteria: Facts Versus Ficton » CanuckPost.com on Why I Am Cautiously Optimistic About 2010 $$
- CRM Still Thinks -1 + -1 = 2 | ValuePlays on What Did CRM Buy in Buddy Media?? Increasing Losses and Cash Serious Flow Drain…
- Student Loans Won’t Kill Housing Recovery – ValueWalk | on Student Loans and Housing