OshKosh vs Cat: Not much of a fight
Today's Financial News - Posted October 20, 2009
Caterpillar (NYSE:CAT) is doing well today, but I’d rather own OshKosh (NYSE:OSK). One is struggling for growth, the other has more than it can handle.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): All eyes are on Caterpillar (NYSE:CAT) and its latest earnings report, but for investors searching out a shot at a company growing by leaps and bounds in the heavy machinery industry, there are better places to set your sights.
The heavy-equipment manufacturer sent its shares higher today on the news its latest earnings beat even Wall Street’s “whisper” figures.
Thanks to international growth, strong cost cutting and, of course, nearly a trillion dollars in stimulus spending, Caterpillar managed to earn $404 million over the past quarter.
Sure, the company raked in more than twice that figure, $868 million, a year ago and revenues plunged by 44% to $7.3 billion since this time last year, but investors remain in a celebratory mood.
After all, it could have been worse.
Frankly, I don’t get the jubilation. As I write, shares of the company are trading at a premium to year-ago prices, yet the revenue stream is significantly lower and showing few signs of climbing back to historic levels anytime soon.
The bears are ready
Many investors are focusing on the commodities boom as a potential catalyst for future top-line growth. I don’t buy it for one instant.
Remember, the current commodity price appreciation is based chiefly on a weakening dollar, not increased demand. The weaker dollar will help Caterpillar and its 67% of revenues derived overseas, but a dollar-weary commodities market will do little to keep salesmen busy.
If you are looking for sales growth, take a gander at OshKosh (NYSE:OSK). While Cat handed its shareholders gains of about 50% over the last year, OshKosh is closing in on the 800% mark.
The Wisconsin-based heavy-truck manufacturer’s shares surged from lows below $4 per share to $34.99 (and new highs seemingly every week) thanks to a massive round of contracts from the Pentagon.
Instead of relying on the world’s economy to get back in line and eat away at enormous levels of inventory, OshKosh turned to Uncle Sam and a brand new, incredibly rich revenue stream.
It has worked tremendously well.
OshKosh will release its latest earnings figures on November 3. I wish I could tell you what to expect, but so much has happened with this company over the past three months, the estimate spectrum is lengthy.
If the company can produce verifiable evidence that the revenue growth will continue, shares will be on the rise, no matter what the current quarter’s earnings figure.
But if the outlook is weak, even a strong earnings figure won’t be able to keep those new highs coming.
Even with the uncertainty, I am much more bullish on Oshkosh than Caterpillar. One company is overgrown and has nothing but macroeconomic factors on its side. The other is quickly expanding into a top-notch defense contractor.
Which would you rather have?
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