Get The Ticker Tape delivered right to your inbox.

X

Caterpillar, Ford and Bristol-Myers Squibb Roll Out Earnings Thurs

Print
January 25, 2017
Heavy machinery quarterly earnings report for Caterpillar, Ford, and Bristol-Myers.
Getty Images

Three stocks that are ready to post Q4 results have each navigated some rocky terrain in the last three months of the year, each for different reasons.

On the heavy machinery side, it’s been Caterpillar’s (CAT) efforts to keep profits alive amid a challenging economic period. Meanwhile, Ford (F) appears to have been in the catbird seat while the auto industry has enjoyed another record year of sales, driven primarily by popular vehicles like the F-150 pickup truck.

Where does Bristol-Myers Squibb fit in? It’s all in the drugs—cancer-fighting drugs—that have stalled in the testing phases. Here’s what might lie ahead as the three release Q4 earnings, scheduled for pre-market open Thursday.

CAT’s Outlook under New CEO

CAT, whose bright-yellow front loaders, bulldozers, excavators and tractors dot the landscapes of many construction, mining and farm sites globally, has fought to remain profitable amid a four-year downturn in the construction economy and overall weakness in the commodities markets.

At a conference in December, CAT executives said there has not been much change in the industries CAT serves, with the exception of North American construction. It did not expect to see a “significant rebound in order activity in mining or oil or gas yet,” adding that rail continues to be weak in North America.

However, “substantial” cost reductions were nearing $1.8 billion at the end of the third quarter, and some analysts say they expect the cuts in people, floor space, materials and other costs, may top $2 billion for the full year. CAT acknowledged that it was on track to pass that amount.

What is on tap for 2017? Some analysts say it may be another down year for the manufacturing giant. Though the company conceded at the conference that 2017 would be difficult because of a number of global economic issues, executives said that they were “encouraged” by the potential of a U.S. infrastructure bill and tax reform.

Chief Executive Jim Umpleby is expected to make his first appearance on the call as the new guy in charge, succeeding Doug Oberhelman, who retired at the end of the year. Some analysts say they are looking for some insight into how Umpleby plans to run the company.

The Q4 consensus earnings estimate from third-party Wall Street analysts is $0.65 a share, according to the Earnings Analysis tab on the thinkorswim® platform from TD Ameritrade. Revenue is projected fall to $9.75 billion from $11.03 billion last year.

The options market has priced in an expected share price move of 2.8% in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform.

Call activity has been concentrated at the 99 strike while puts have been active at the 93 strike. The implied volatility sits at the 15th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

CAT, 3m, 2016-17

FIGURE 1: CAT ATTACK.

Shares of CAT are up some 66% on the year. Since the presidential election, they have gained nearly 14%. Chart source: thinkorswim® by TD Ameritrade.  Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Ford’s Pick Up and SUV Stories

The auto industry drove itself higher again in 2016, with record sales of 17.55 million vehicles. But some analysts are worried that the new peak may have been reached with a trunkful of incentives that may be hard to top this year, and that could impact margins.

By far, the biggest auto-model sellers in 2016 were pick-up trucks and sport utility vehicles, according to industry publications, which note that six of every 10 vehicles sold in the U.S. were in one of those two categories. F, meanwhile, logged trucks as its No. 1 source of sales, at more than 31% of revenues.

Some analysts say they will be looking for more insight on the meeting earlier this week between President Trump and auto industry leaders. Media reports say the President promised to ease environmental rules and other regulations, to encourage the return of manufacturing jobs to the United States. 

The consensus per-share earnings estimate from third-party Wall Street analysts is $0.35, according to the Earnings Analysis tab on the thinkorswim® platform. Revenue is projected to fall to $35.5 billion from $37.9 billion last year.

The options market has priced in an expected share price move of 2.7% in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform.

Call activity has been higher at the 12.5 and 13 strikes, while put activity has been concentrated at the 12 strike. The implied volatility sits at the 21st percentile. (Please remember past performance is no guarantee of future results.)

F, 3m

FIGURE 2: FORD TRUCKS FORWARD.

Shares of F, like some other automakers, initially stumbled after the presidential election amid fears of renegotiated trade deals and tariffs on autos imported to the U.S. But they quickly reversed course and F shares are now up nearly 10% since then. Chart source: thinkorswim® by TD Ameritrade.  Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

BMY’s Struggles with Drug Testing

BMY has seen some clinical trial setbacks with its Opdivo lung-cancer drug. Opdivo was developed as an initial cancer treatment that might replace chemotherapy. Last week, BMY shares hit a 2½-year low after the company said it would no longer look to fast-track its first-line lung cancer tests for its combination of Opdivo and Yervoy, according to a press release.

BMY stated that it wanted “to protect the integrity of ongoing registrational studies.” Four studies are underway, it said. And that’s what some analysts say they are hoping to hear more about.

Also last week, rival Merck & Co. (MRK) said it agreed to make a one-time payment of $625 million plus royalties to BMY and to Japan’s Ono Pharmaceutical, which helped discover and develop the PD-1 drug Opdivo. That will settle a patent infringement lawsuit that the two filed against MRK and its Keytruda drug, which is a treatment for deadly skin-cancer melanoma. 

The consensus earnings estimate from third-party Wall St. analysts is $0.66, according to the Earnings Analysis tab on the thinkorswim® platform. Revenue is projected to rise to $5.14 billion from $4.28 billion last year.

The options market has priced in an expected share price move of 3.1% in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform.

Call activity has been higher at the 50 and 51 strikes strike, while put activity has been concentrated at the 49 strike. The implied volatility sits at the 55th percentile. (Please remember past performance is no guarantee of future results.)

BMY, 3m

FIGURE 3: ON THE MEND AGAIN?

Shares of BMY took a 19% hit in early August after its immune-oncology drug Opdivo failed some clinical testing. The shares had been on the mend, but took another hit last week when BMY said it would not seek accelerated approval for its combination of Opdivo and Yervoy. Chart source: thinkorswim® by TD Ameritrade.  Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

NC
Scroll to Top