Caterpillar
warns equipment sales still falling
(CNBC) - Caterpillar saw retail sales of machinery fall 16 percent worldwide
for the three-month period ended in December, the construction and mining
equipment company said on Wednesday.
Caterpillar, which is due to report earnings on Thursday, has been pressured
by the global slowdown in the energy and mining industries.
The company said retail sales to resource industries worldwide fell 38 percent
over the three-month period, while retail sales to the energy industries
fell 32 percent.
The pace of declines is also increasing, the company noted in an SEC filing.
The worldwide decline in retail sales of machines had been 11 percent for
the three months ended in November.
Goldman Sachs recently downgraded the company to "sell," an unusual and
notable call from a major Wall Street firm, saying it expected lower machinery
demand from commodity producers.
Caterpillar shares dropped 2.1 percent in early trading. The stock is down
about 22 percent since early November and more than 34 percent from its highs
last May.
Boeing
forecasts 2016 earnings below estimates; shares tumble
(Reuters) - Boeing Co said on Wednesday it would deliver fewer planes in
2016 and forecast earnings below expectations, sending shares tumbling as
much as 10 percent to a 52-week low.
The world's biggest planemaker also reported weaker fourth-quarter profit,
mainly due to a charge announced last week for slowing production of the
747-8 jumbo.
Boeing expects to deliver 740 to 745 planes in 2016, its centenary year,
down from a record 762 in 2015. It will build fewer 737s as it shifts that
factory to the upgraded 737 MAX. It also is cutting 747-8 output in response
to weak demand.
Boeing forecast 2016 core earnings, excluding some pension and other costs,
between $8.15 and $8.35 per share, below the average analyst estimate of
$9.43, according to Thomson Reuters I/B/E/S.
Its forecast for about $10 billion in operating cash flow in 2016 raised
concern among analysts.
Boeing's net income fell to $1.03 billion, or $1.51 per share, in the fourth
quarter, from $1.47 billion, or $2.02 per share, a year earlier.
Core earnings declined to $1.60 per share from $2.31, reflecting a charge
for slowing production of the 747-8 jumbo jet. Wall Street looked for core
earnings of $1.26 per share, according to Thomson Reuters I/B/E/S.
Fourth-quarter revenue fell about 4 percent to $23.57 billion. Analysts
expected $23.53 billion, according to Thomson Reuters I/B/E/S.
Is
Bank of America on Life Support?
(The Street) - If the current economic trajectory for global recession holds,
and I think it will, one of the victims is going to be Bank of America (BAC).
And it probably won't survive.
This is not because of any changes with respect to the company's business
strategy. It's because no changes have been made.
Since the Lehman-era crisis, Bank of America has been dealing with legacy
issues, buying loan business by offering much lower interest rates to institutional
borrowers on commercial and industrial (C&I) loans than the other money
centers, and reducing costs by firing people.
That's not a business strategy, though. That's just hunkering down and trying
to outwait the economy and business environment with the expectation of "this
too will pass."
In the first several years following the Lehman era, the "this too will
pass" belief was predicated on the Fed stimulus causing an increase in borrowers
that would allow for an increase in economic activity and an ability to both
absorb the legacy losses and eventually grow the bank again.
The oncoming recession is going to challenge all four money centers, but
it represents an existential crisis for Bank of America because it's going
to move from dealing with mortgage legacy issues to dealing with oil-sector
loan defaults without any way of cutting costs or buying revenue by offering
lower-cost C&I loans than the other three money centers.
The bank has already steadily reduced its labor force for the past seven
years, resulting in a 30% cut in total and the smallest number of full-time
employees of all the money centers.
Bank of America is on the verge of having investors realize that the bank
is in runoff mode.
Three companies in very different fields, all of which are forced to admit
that their business model doesn't match the environment. All hope the environment
will improve, but in fact it's deteriorating at an accelerating rate. The commodities
complex is still contracting due to vast overcapacity (Cat). Air travel is
becoming ever-less attractive as former tourist destinations like Greece and
Egypt (and Paris) descend into chaos while new diseases make even boarding
a plane a life threatening activity. See Women
asked to avoid pregnancy as zika virus spreads (Boeing). And banks
have leveraged every corner of the world and are running out of people to con
into borrowing more. (BofA)
The result: Weak numbers stretching as far as the eye can see, punctuated
by the occasional existential crisis. Not the ideal "hot stock" profile.
