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Fast Money

Buy the CAT Pullback?


After a strong earnings report, why are investors dumping Caterpillar ? The stock sold off sharply despite rather impressive earnings that showed first-quarter profit jumped 29 percent .

Also, Caterpillar boosted its outlook for the year – that all sounds bullish.

The Fast Money pros think the stock sold off because Caterpillar didn’t increase its revenue forecast and because new economic data showed demand for durable goods had tumbled broadly - the most in 3 years.

But despite potentially negative catalysts, if you have a long-term time horizon Jefferies analyst Stephen Volkmann says “Buy the dip. I think you buy the stock.”

“Almost all of the end markets that these guys touch, US construction, housing starts, construction in Europe, they are all near low levels cyclically,” Volkmann explains.

In other words, “Caterpillar still has a lot of runway ahead of them. Sure there are going to be bumps in the road but overall it’s early in the process.”

If however you have a shorter time horizon, pro trader Guy Adami suggests caution.

“Valuations are compelling but the stock hasn’t traded particularly well – and if there’s more evidence that China is slowing, I think the Street sells CAT. In the near-term, I think it could touch double digits.”

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Trader disclosure: On Apr 25, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Jon Najarian is long call spreads in AAPL; Jon Najarian is long call spreads in INTC; Jon Najarian is long call spreads in IBM; Jon Najarian is long call spreads in ANF; Jon Najarian is long call spreads in SBUX; Jon Najarian is long call spreads in MSFT; Jon Najarian is long call spreads in CRUS; Jon Najarian is long call spreads in BRCM; Jon Najarian is long CBOE; Jon Najarian is long CME; Jon Najarian is long CGIX; Jon Najarian is long DDMG; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long JNPR; Joe Terranova is long NXPI; Joe Terranova is long JPM; Joe Terranova is long JOY; Joe Terranova is long HPQ; Joe Terranova is long LQD; Steve Cortes is long MO; Steve Cortes is long RGR; Steve Cortes is long DEO; Steve Cortes is long PFE; Steve Cortes is long ZSL; Steve Cortes is long SO; Steve Cortes is long PPH; Steve Cortes is short XHB; Steve Cortes is short AAPL

For Stephen Volkmann
Stephen Volkmann, CFA, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

For Jim Iuorio
Jim Iuorio is long TBT

For Walter Piecyk
Nothing to disclose

For Dennis Gartman
Dennis Gartman is long GOLD with wires.