“I would say non-financials, we have been talking enough about the banks, what about DuPont and Caterpillar and Coke, a lot of the companies, America, reported earnings that haven’t been that strong and the guidance has been ugly.” Fox Business Network 4/21/2009.
The exuberance exhibited during the six week, nearly 30% rally is showing signs of weakening. The rally was fueled mostly by a sense that the financial stocks are stabilizing, and the bottom has already been put in. However, as more non-financials report to the market, there is a recognition that there is a significant amount of difficulty ahead for the rest of 2009.
Caterpillar (CAT) shares are trading down about 4% this morning as the Big Cat swung to its first loss in 16 years and lowered guidance for the rest of the year as a difficult sales environment is expected to persist. Sales were particularly weak, down 30%, in the U.S. because of the contraction in home building and other construction projects. Housing starts are less than one-quarter the level they were at their peak in January 2006. The company also took a charge of $558 million or 58 cents per share related to reducing employment levels. Excluding that charge the company was profitable in the quarter, but the CEO warned that more job cuts could be ahead. When Caterpillar’s CEO Jim Owens speaks many people listen, as he is a trained economist and predicted the current recession just months before it began.
In comparison to Caterpillar, Coca-Cola (KO) and DuPont’s (DD) earnings were pretty decent. DuPont beat earnings forecasts while revenue declined by nearly 20%. While Coke’s earnings were in line with consensus estimates, revenue again was lower than expected. Coke is trading slightly down, while DuPont is up about 3% in morning trading.
Along with financials, tech companies continue to be the stars of the earnings season as Monday’s after the bell reports from IBM (IBM) and Texas Instruments (TXN). Both companies did better than analysts expected, and were able to reaffirm full year guidance. So far it seems to be the tale of two earnings seasons: the market is seeing a bottom forming for financials and tech, while everyone else is still struggling to deal with a tough environment and revenue on the slide.