Month: April 2014

Caterpillar Inc American company that specializes in the manufacturing

Founded in 1925, caterpillar Inc. is an American company that specializes in the manufacturing, designing, marketing and selling of machinery and financial products via a worldwide dealer network. The price of Caterpillar stocks today stands at $102.73, showing a 0.81% increase since yesterday. Looking at it from a macro perspective, the prices of cat stocks have risen steadily over the span of the last year from $80 to $102 per share. From an investment standpoint is largely regarded as a neutral stock, meaning it is relatively stable compared to the others in its class. An example of this being that analysts at JPMorgan Chase & Co. raised the price target on caterpillar stocks from $92 to $96 in a research note this Thursday. Similarly analysts at Robert W. Baird did the same form $94 to $97 on Wednesday. Fifteen research analysts have granted the stock a “hold” rating while six have given it a “buy” rating.

However, with the recently disclosed tax evasion scandal regarding CAT misallocating its sales to avoid taxes, Caterpillar Inc.’s stock prices might not be able to maintain this upward movement for very long. Already it seems as if investor interest has taken a hit. If this case does not go in the favor of CAT, they might end up having to pay hefty fines to the US government; money that everyone knows could be better spent elsewhere (for example infrastructure development). Needless to say Caterpillar’s current stock prices are in decline. It all depends on how well the top-tier management can navigate the company out of its current plight.

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The Boeing Company stock

The Boeing Company stock’s worth today is $127.55 having declined by 0.21% since the day prior. Since previous months, many analysts have lost optimism regarding their point of views on Boeing’s earnings, reducing their Q1 2014 estimates by ten percent by decreasing their 2014 and 2015 approximations by 1 percent – 3 percent. Their fourth quarter earnings didn’t get off to the best of starts as the stock has pulled back by 8%.

In order to rectify this and increase the worth of The Boeing Company stock, they are expanding their production so that they may face clear skies ahead. Boeing have already reported that it has delivered 161 airplanes in Q1 2014. However, The Boeing Company stock will be the beneficiary over the fact that their deliveries of the next-gen 737 aircraft and 787 Dreamliner are going very strong. If Boeing cannot increase production without sacrificing their product’s quality, then they are in for turbulent skies ahead. This will also have a negative effect on many smaller companies such as General Electric, United Technologies etc. as they depend heavily on Boeing.

Fortunately, for Boeing they are ranked as one of the most influential airplane manufacturer in the US market and the country depends heavily on Boeing as it proves itself to be a very functional aspect of the economy. News regarding Boeing stakeholders is that it still is the most influential player in its industry despite their past concerns their stock is still a good bet, and may eventually amount to a fruitful yield.

Delta Airline Performance in the previous quarter.

 

Delta Airline performance in the previous quarter was quite satisfactory and it beat the analysts estimates as well as company guidance. The main reason behind better performance of the company is the fuel costs that it has been working on to decrease. The company’s overall operating expense or fuel costs were around $2.8 billion that is around 32% of Delta Airline’s total operating expenses. In the current quarter, the fuel prices declined by 3% year over year, and the total consumption of the oil increased by 3%. The average price per gallon was positive and decline by 17% up to $2.97. The decline in the oil costs is just for a while and currently the fuel costs are increasing upwards. The demand for the jet fuel is higher and the supply is lower than the demand that means higher prices for the jet fuel if the supply is less then. Delta Airline has already made plan to reduce its costs for jet fuel. Delta Airline Stock over the last six months has surged from $27 to $36. The company’s crude refinery will help it to reduce its fuel costs and also improve its earnings per share. Delta Airline Stock is a good investment for those who want to invest for long run.

Some Of Boeing Strong Results Of Fiscal Year 2014

Boeing is one of the top performing company in the aerospace and defense industry. It recently announced strong results for its first quarter fiscal year 2014. The first quarter’s earnings beat the company’s guidance, as the backlog for the quarter was around $440 billion and the company provided guidance of $90.5 billion. Now considering that, the backlog of the company for first quarter fiscal year 2014 is 8 time higher than the company’s guidance. After the company announced its quarterly result, the BA stock price surged from $128 to $130 after the announcement. Although the BA Stock price is currently changing hands at $128 but it might surge if the company announces share repurchase in near future. In the first quarter of fiscal year 2014, the company’s total net booked commercial airplane orders were 235 and the company’s commercial backlog increased over 5,100 planes that were valued to be around $374 billion. In the top line of the commercial airplanes of Boeing, the backlog is currently 6 times higher. The analysts believe that Boeing is currently positioned in the industry among the most attractive firm across industrial sector. The company’s total debt is currently around $8.9 billion while the marketable securities of the company are totaled to be around $12.2 billion. Meanwhile the company’s CEO believe that the demand for their commercial airplanes will remain positive because the they provide the best and most fuel efficient commercial airplanes in the industry.

It’s Not looking Good For Boeing

The Boeing Company is operating in such an industry, where the strength and potential growth of the company is as important as the performance of the company itself. It’s obvious that for a company like Boeing, the market’s demand should also be high but for now that doesn’t seem to be happening. The US government has decreased its defense budget, and demand for the defense aircraft of the company is decreasing. The company’s performance now relies on its commercial business segment, as the commercial aerospace will always be in trend considering the price competitive market and the massive backlogs. The company has already received a decade orders as of now, and the commercial segment is going to bring better revenues for the company than its defense segment. The Boeing Company announced its first quarter fiscal year 2014 results on Wednesday. The results were quite strong than the company’s guidance. The company’s total backlog for the first quarter fiscal year 2014 was $440 billion which was higher than the company’s guidance itself. Boeing provided the guidance for the first quarter to be around $90.5 billion. The current level of backlog is almost 8 times greater than the company had in fiscal year 2011. The revenues of Boeing in first quarter fiscal year 2012 was $390, while in the same quarter in fiscal year 2011 it was $355 that the company has now outperformed.

Outlook for CAT seems Bearish.

Caterpillar (CAT) news recently came in when it announced that it is going to sustain the cash dividend for the current quarter. The dividend per share of CAT is $60 cents per share of common stock. The company declared that it generated a record cash flow in FY13 making its balance sheet reflect the best fundamentals since 25 years. The company also repurchased a total of $1.7 billion worth of shares making it the largest quarterly share buyback program they have ever had.

Revenues for CAT for 4QFY13 were $14.4 billion, which were down from the year ago quarter by 10.4%. However, Net operating expense in the same period was $2.4 billion declining by 23% from the year ago quarter. This contributed majorly in a high net income for the period. Net income for current quarter was almost $1 billion which was 44% more in value from the same quarter last year.

Due to higher Net income, Earnings per share for 4QFY13 were $1.57 which were 46.7% more in value from the year ago quarter. Net cash flow from operations were $2.5 billion in 4QFY13 which were up by 30% from the year ago quarter.

Net free cash flows (Net income minus capex) in 4QFY13 also appreciated by 202% in value from the year ago quarter. However their Capex in the same period declined by 17%.

CAT stocks have increased by 13.24% in value since the start of 2014 and analysts expect it to reach a consensus estimate of $98 in the coming 12 months and give the stock a hold rating.

During the recent Russia-Ukraine conflict, there were a lot of political tensions in the region. This can be a big worrying sign for CAT if Russia decides to retaliate against US sanctions. CAT has invested over $1 billion in the region since year 2000, and if Russia retaliates, it could stop trade between the two countries which is worth more than $38.2 billion. Sectors like Mining, manufacturing and banking will be largely affected from this event.

Furthermore, CAT lost the contract with Siemens (SI) and Cummins (SMI) that would have earned CAT $226 million. It also lost the contract in Illinois where they were required to manufacture locomotives for high speed trains.

Considering all these factors, outlook for CAT seems bearish. CAT stock quote as on 18th April 2014 was $102.83 down 0.10% from previous day’s closing price of $102.93. CAT stock graph has shown an upward trend this year since it has increased 13% in value year to date. But moving forward, CAT growth prospects are not as expected due to which their Revenues will remain flat as for the next year. Their stock price is expected to shed value for the same reason. CAT’s beta is 1.81 which is relatively high and shows that it is an aggressive stock and is much exposed to external and macroeconomic factors.

CAT is trading at a premium of 15% from the broader market but given its growth prospects and factors explained above, it is an overvalued stock and investors should take a short position given the risk associated with it.

Delta Airline Market Analysis

Delta Airline is one of the top companies in the airline industry. The performance of delta airline has always been satisfactory for its investors. Delta Airline Stock price has been increasing from past six months because the company is performing well and generating higher revenues. The company’s operating income increased by 56% in fiscal year 2013. Other than that, the company’s net profit has also been quite well. It recorded net profit of $10.5 billion for full year 2013. The approximate per share earnings of Delta Airline for the fiscal year 2013 is around $2.46 because the free cash flow of the company were around $2.1 billion in fiscal year 2013. In fiscal year 2013, Delta airlines turned negative equity to positive position, by turning -$2.1 billion to $11.6 billion. Currently the Delta Airline Stock is trading at 2.3 times its book value, which is neither cheap nor expensive.

United States Government Cut the Defense Budget Of Boeing Company.

Boeing has been a very successful company, especially in fiscal year 2012 the company outperformed but later on in fiscal year 2013 its performance was not that good compared to year 2012. As the US government has cut their defense budget, it has put a huge impact on Boeing’s performance. The majority of its revenues were generated from the defense business segment of the company. The investors currently think that the commercial business segment of the company will not be able to perform up to the mark compared to its defense business segment. The investors worry more about the quick growth of the company while considering the commercial business segment of Boeing, it will grow but in a slow pace. This makes the investors confused either to stay with the company or sell shares. BA Stock Price has been affected considering the current situation. On the other hand, in order to make the BA Stock Price sustain in the market, Boeing is going to lay off 600 employees in order to reduce operating expense of the company and come up with better earnings.

Caterpillar Big Ups and Downs in the Stock Market.

Caterpillar (CAT) news recently came in when it announced that it is going to sustain the quarterly cash dividend. The dividend per share of CAT is $60 cents per share of common stock. The company declared that it generated a record cash flow in FY13 making its balance sheet reflect the best fundamentals since 25 years. The company also repurchased a total of $1.7 billion worth of shares making it the largest quarterly share buyback program they have ever had.

Revenues for CAT for 4QFY13 were $14.4 billion, which were down from the year ago quarter by 10.4%. However, Net operating expense in the same period were $2.4 billion declining by 23% from the year ago quarter. This contributed majorly in a high net income for the period. Net income for current quarter was almost $1 billion which was 44% more in value from the same quarter last year.

Due to higher Net income, Earnings per share for 4QFY13 were $1.57 which were 46.7% more in value from the year ago quarter. Net cash flow from operations were $2.5 billion in 4QFY13 which were up by 30% from the year ago quarter.

Net free cash flows (Net income minus capex) in 4QFY13 also appreciated by 202% in value from the year ago quarter. However their Capex in the same period declined by 17%.

CAT stocks have increased by 13.24% in value since the start of 2014 and analysts expect it to reach a consensus estimate of $98 in the coming 12 months and give the stock a hold rating.

During the recent Russia-Ukraine conflict, there were a lot of political tensions in the region. This can be a big worrying sign for CAT if Russia decides to retaliate against US sanctions. CAT has invested over $1 billion in the region since year 2000, and if Russia retaliates, it could stop trade between the two countries which is worth more than $38.2 billion. Sectors like Mining, manufacturing and banking will be largely affected from this event.

Furthermore, CAT lost the contract with Siemens (SI) and Cummins (SMI) that would have earned CAT $226 million. It also lost the contract in Illinois where they were required to manufacture locomotives for high speed trains.

Considering all these factors, outlook for CAT seems bearish. CAT stock quote as on 18th April 2014 was $102.83 down 0.10% from previous day’s closing price of $102.93. CAT stock graph has shown an upward trend this year since it has increased 13% in value year to date. But moving forward, CAT growth prospects are not as expected due to which their Revenues will remain flat as for the next year. Their stock price is expected to shed value for the same reason.

CAT is trading at a premium of 15% from the broader market but given its growth prospects and factors explained above, it is an overvalued stock and investors should take a short position given the risk associated with it.

Delta Airlines and its Pre-Tax Income.

Delta Airline is one of the top players in the airline industry from decades. The company has outperformed in the airline industry among its competitors and in terms of pre-tax income it has produced higher than any other airline company in the industry. Its pre-tax income has been around $2.7 billion in last year, and that reflects as 71% year on year increase. The company’s stock price surged by 130% in fiscal year 2013, and in the S&P 500 index its stock was one the best performing stock among all other companies stock.  Delta Airline is recognized as the world’s most admired company according to Fortune Magazine. And it also made a place for itself in the world’s top 50 most admired company around the globe. The company’s revenues are expected to grow considering the higher passenger’s traffic around the globe.  The economists are expecting a robust growth in the economy of Africa, Latin America, and Asia. That will influence directly the Delta Airline’s performance in a positive way.