Capital Goods Sector Review: Caterpillar’s Deal, Boeing Earnings Preview

Caterpillar Inc. (NYSE:CAT) and BAE Systems (BAESY) have signed a long-term supply agreement to collaborate on an energy efficient parallel hybrid propulsion system for heavy-duty trucks. Under the 20-year agreement, BAE Systems will integrate the Cat CX family of transmissions into its HybriDrive parallel propulsion system, and will establish an aftermarket field services model leveraging Caterpillar’s global service network to support the growing installed base. The long-term supply agreement helps to ensure a consistent supply of transmissions from Caterpillar; long-term production pricing schedule; a warranty agreement; and a field service support model designed to make use of Caterpillar’s global network. The HybriDrive parallel system is in final stages of development and is expected to be deployed in markets around the world early in 2013.

The shares closed at $106.29, down $0.08, or 0.08%, on the day. Its market capitalization is $68.73 billion.

The Boeing Company (NYSE:BA) is expected to report Q4 earnings on Wednesday, January 25 before the market open with a conference call scheduled for 10:30 am ET. Analysts are looking for EPS of $1.01 on revenue of $19.38B. The consensus range is 82c-$1.15 for EPS, and $18.32B-$20.97B for revenue, according to First Call. The company reported mixed results in Q3, beating EPS but narrowly missing revenue estimates. On its Q3 conference call, Boeing said passenger traffic remained resilient and expected order traffic for its current programs to remain strong through year-end. Despite the positive sentiment, management said financial constraints imposed by deficit reductions would likely have an impact going forward. The extent of the constraints would be influenced by Congress’ ability to achieve its deficit-reduction targets. Since Q3 results were released, Boeing’s shares have risen approximately 15%, and are near their 52-week high of $80.65 made in April of last year. Questions surrounding defense budget cuts in FY12 and beyond could have an impact on the shares over time. However, in the short term, they have rallied about 20% since late November.

The shares closed at $75.36, down $0.15, or 0.2%, on the day. Its market capitalization is $56.01 billion.

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To contact the reporter on this story: Stella Mariz at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com