Trader Talk

Improving Global Economy Shows Up in Earnings


Topline beats take back seat to positive 2010 commentary. Six big names beat earnings estimates: Apple, Coke, Pfizer, United Technologies and Caterpillar all beat on the bottom line.

But something's different this time: a higher percentage are beating on the topline as well. Apple did. Even Dupont, Pfizer and UTX did.

What is different this time is that the big multinationals have reaped the benefits of an improving overseas market, along with the weaker dollar.

The improving global economy is showing up in several of today's comments.

Caterpillar's Jim Owens:

1) "the third quarter marked the low point for Caterpillar sales and revenues"

2) "we are seeing encouraging signs that indicate a recovery may be underway"

3) 2010: "we've already started planning for an upturn"


1) futures dropped at 8:30 AM ET as September Housing Starts and Permits were below expectations.

2) Caterpillar up 6 percent pre-open, came in at $0.64, way above the $0.06 expected. Sales were not a blowout: $7.3 billion vs. $7.49 billion consensus.

The bull consensus seems to be playing out: Q2-Q3 may indeed be the trough for production, and with inventories lean even a small improvement in orders will help the top and bottom line.

2010 preliminary guidance of an increase of 10 to 25 percent for sales is also a positive surprise.

3) UTX at $1.14 beat by $0.02, and while revenues were a tad better than consensus cost cutting was the major factor in the beat. CEO Louis Chenevert said orders had "stabilized."

4) DuPont beat consensus by two cents and talked about improving demand across key markets. Here's an interesting stat: profit is up 11 percent, but top line dropped 18.3 percent. They narrowed their earnings outlook for the now expects earnings of $1.95 to $2.05 per share versus previous estimate of $1.70 - $2.10.

5) Strong earnings from Texas Instruments, as well as earlier strong report from Intel and Apple should keep the semiconductors going. The SMH (Semiconductor HOLDR, the main ETF-type instrument professionals use to trade semis) has been strong all year, bottomed earlier than the S&P 500, and has had a stronger recovery in the past year.

6) Coca-Cola topped Street estimates by a penny. The soft drink maker says higher sales volume and cost cuts helped pop Q3 profits. Sales by volume rose 2%.

7) Pfizer also beat the Street. The drug maker came in at $0.51 for Q3 excluding items vs. estimate of $0.48. Aggressive cost-cutting helped offset the negative foreign exchange and competition from cheaper generics.



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