Wall Street Watch Tuesday: Caterpillar Gets Pessimistic, Cuts Outlook


Caterpillar (CAT) is refreshing its outlook for 2015.

The world's largest maker of construction and mining equipment is looking to earn between $12 and $18 in 2015, fueled by $80 billion to $100 billion in revenue. These may seem like big numbers, but keep in mind that Caterpillar topped $60 billion in sales last year. Projecting sales to grow by as little as 33% in four years isn't going to impress growth investors.

However, the real problematic part of Caterpillar's new guidance is that its old bottom-line forecast was calling for the global bellwether's profitability per share to clock in between $15 and $20.

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Investors naturally don't like to see any guidance revised lower, but it's also important to put these prognostications in perspective. Caterpillar is a cyclical company, and it also happens to be at the mercy of the world economy.

So many things can go wrong -- or right -- over the next three years. Relying on an outlook that will likely change often between now and then isn't something that smart investors would do.

Other Things Worth Watching

• Paychex (PAYX) is offering a mixed check of its latest quarterly report. The payroll processor posted a quarterly profit of $0.42 a share. This may be marginally ahead of the $0.41 a share that Paychex posted a year earlier, but Wall Street was actually expecting flat earnings growth. Unfortunately the same can't be said for Paychex's top line. The $578.2 million in revenue recorded during the period falls just short of $584.1 million that the pros were targeting.

• Red Hat (RHT) also followed Paychex in offering up mixed results after Monday's market close. The provider of open source enterprise software solutions on a subscription basis went the other way, as revenue came in better than expected but income fell short of Wall Street guesstimates. Backing out acquisition-related costs would find Red Hat landing closer to where the pros were perched, but the market needs more than that out of Red Hat if it wants to tip its own hat.

• Selling 5 million iPhone 5s in a weekend is impressive, but not to analysts who were expecting Apple (AAPL) to clear closer to 6 million smartphones. Apple shares fell below $700 during Monday's trading on the news, and now the next few days will dictate if the market is willing to overlook the supply shortages to embrace the long-term iPhone growth story.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Paychex and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a write covered straddle position in Paychex.

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