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Caterpillar News: Is The Company a Dying Cat?

Caterpillar news: A popular saying says that cats have nine lives. Assuming that Caterpillar Inc. (NYSE:CAT) is indeed a cat, it can be noted how quickly the firm is burning those lives. The firm announced its ninth consecutive month with dropping sales, reporting a 10% plunge when compared year-over-year for the quarter ended in August. The last drop has been blamed on slower sales in the Asia-Pacific region. It is worth mentioning the company made a great effort to enter the region in order to search for geographic diversification and counter slow performance in other markets.

Caterpillar Inc. (NYSE:CAT)

The total loss in the Asia-Pacific region is of 30% less sales year-over-year. Most responsible for the drop, is the lower prices of mined commodities and a slower Chinese economy. Analysts estimate the Asian giant will be growing in the 5-7% annually, in comparison to the sustained 9-10% over the last decade. Both events have had a great impact on Caterpillar. Additionally, there are many strong enough native competitors to challenge the yellow giant. Komatsu Ltd (ADR) (OTCMKTS:KMTUY), for example, introduced hybrid engines and global positioning systems, providing customers with an opportunity to save on gas while improving precision.

Sales in the North American region have, however, seen improvements. Figures show a 1% increment in total sales after 8 months of continued drops. Hence, it cannot be concluded whether the change represents the start of a trend. The lack of confidence on Caterpillar has materialized on the denial of a loan by the Export-Import Bank -a government-run institution that offers loan guarantees to help U.S. companies get products into foreign markets. The good news is that lobbying at the US Congress is paying dividends for the company as US representatives from Minnesota and Michigan have already wrote letters to the bank’s Chairman Fred Hochberg.

A fool recommends staying with the company for another 3, 5, or 10 years until it recovers, because the company has a long-term strategy. His understanding is that the housing recovery in the US and increasing electricity demand (supplied mostly by carbon generators) will drive growth in the short-term. In short, the present for Caterpillar is not the best, and future growth depends on many uncertain catalysts. For starters, it will have to reverse the recent loan denial and turn the North American rebound into a trend. Check back here for more Caterpillar news updates.

Disclosure: Jodor Jalit holds no position in any of the mentioned stocks.

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