Caterpillar (CAT) is a dominant industrial stock with big name recognition and a nice 2.9% dividend yield. And very recently it won the title of “best Dow stock of the year,” tacking on an impressive gain of 56% in 2010 vs. about 11% gains for the broader industrial average.
But those were happier times, and CAT stock is right back where it was about three years ago and is off about 25% from its 2011 peak — including a roughly 4% decline year-to-date in 2013 vs a significant rally for the rest of the stock market.
Recent softness has been thanks to three straight earnings misses in a row. In January it was a big writedown thanks to fraud at a Chinese company it acquired, in April it was an earnings miss and disappointing guidance and then just a few weeks ago in July it was an ugly 43% slump in profits.
But it’s also the bigger end to a commodities boom we saw a few years ago. Global mining growth that was taking place in spite of the financial crisis has now faded, and the impressive results off the bear-market lows have been met with nothing but disappointment in recent years.
And thanks to slowing commodity demand in China, that mining outlook isn’t going to change anytime soon.