Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

A Dismal Forecast

October 25, 2017 By Jeremy Jones, CFA

Groucho Marx

“Who are you gonna believe, me or your own lying eyes” Groucho Marx

From Bloomberg on October 23, 2014:

Caterpillar Climbs After Raising Forecast on Construction

“Caterpillar Inc., the largest construction-equipment maker, climbed the most in more than eight months after topping analysts’ profit estimates for the third quarter and raising its full-year earnings forecast.”

Fast forward three months.

Yesterday, Caterpillar reported fourth quarter results that disappointed Wall Street. The company lowered its forecast for 2015 on the back of falling oil prices. CEO Doug Oberhelman said “The recent dramatic decline in the price of oil is the most significant reason for the year-to-year decline in our sales and revenues outlook.” Caterpillar shares were down 7.2% yesterday.

What is the takeaway here? First, Mr. Oberhelman should get out of the forecasting business. His crystal ball is no better than the rest of ours, but unfortunately for CAT shareholders, the analysts who follow the company take Mr. Oberhelman’s forecasts as gospel. This creates unnecessary volatility in the share price.

In October of last year all of the available evidence (sliding commodities prices, slowing global growth, a strengthening dollar) suggested CAT’s outlook was worsening, but when Oberhelman said otherwise, CAT shares jumped 5%. Until yesterday, when Oberhleman had to cut CAT’s forecast which knocked the shares down 7%.

The second takeaway for you is that management guidance should be taken with a heavy grain of salt.  Management rarely gives investors a candid assessment of their business until they have exhausted all other options.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Dow Jones Industrial Average 30 Stocks
  • Stocks Crater 831 Points
  • Is This a Generational Opportunity in Foreign Stocks?
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #5 in CNBC's 2021 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • BULLWHIPPED? Inventory Overhang Could Slow Growth in Certain Sectors - May 20, 2022
  • MARKET TURNING: Canada’s Housing Market Turmoil - May 19, 2022
  • HORDING CASH: Funds Hold the Highest Level of Cash Since 9/11 - May 18, 2022

Search Young Research

Most Popular

  • MARKET CHAOS: This May Take Time, Here’s How to Prepare
  • PRICES SOAR: Diesel Shortage Could Cripple America's Economy
  • Your Survival Guy: “Sell in May, Buy After Labor Day?”
  • All-Powerful Money Managers Voting YOUR Money Targeted by Senate GOP
  • Institutional Investors Fall in Love with Oil, Again
  • COMMODITY CRUNCH: Will Tesla Buy a Cobalt Mine?
  • CRYPTO: Has the Fire Gone Out?
  • The Innovation Bubble Goes Bust
  • Don’t Throw Your Bond Portfolio Out the Window
  • The Power of a Compound Interest Table

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Joe Biden – Malicious, Incompetent, a Wannabe Left Wing Ideologue?
  • Jean-Pierre: Economy “Not Something that We Keep an Eye on Every Day”
  • Job Market Survival Advice for Graduates and for Those YOU Love
  • The Destructive Rise and Fall of BLM
  • What Would We Do without the Experts?
  • V4 Stands Against North African and Middle Eastern Invasion
  • BUY THE DIPS? Can You Catch a Ginsu Knife?
  • Florida: Enjoy Certain Freedoms and Individual Liberties
  • ENERGY FREEDOM ACT: Ted Cruz Introduces Bill for Energy Independence
  • Consequences of Biden Killing the Keystone Pipeline

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2022 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.