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.”