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A Worry for Caterpillar: Plunging Chinese Excavator Sales

Apr, 11 2012

Caterpillar has gotten a lot of juice out of overseas sales, and China’s been a growing market for the company. So anything undermining that is a concern for investors. To that end, this snippet from our colleague Robert Tita may make investors a bit nervous:

March sales of construction excavators in China plunge 47% to 23,248 units, against tough year-ago sales that were a record at 44,150 units. Caterpillar’s excavator sales last month were down 51%, leaving it with a 5.3% share of the market. But the excavator market should start to look better soon, as year-ago comparisons start reflecting softer market conditions last year in China. The monthly average in 2H of 2011 was just 8,450 excavators, William Blair says. “We should start to see some real growth in the summer,” firm adds.

Caterpillar shares are down about 3%, at $100.55, and traded as low as $99.80, the first time the stock’s traded below the $100 mark since the beginning of January.

As Steve’s written in the past, Caterpillar tends to have an outsized effect on the Dow Jones Industrial Average. For one thing, a $100 stock moves a price-weighted average; for another, Caterpillar’s relatively small float makes it a prime momentum play.

Caterpillar doesn’t report earnings until April 25, but when it does, the state of the company’s China business will be a big deal. As we noted back in the fall, the company had been taking market share from rivals like Komatsu and Sany Heavy Industry.

By Paul Vigna


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