THESIS: The new AMP editon has a bias , as discussed , based on 2012 being a time of economic recovery. Therefore , it is especially important to check the health of the sector that relies on economic strength and forceasts growth . The latest book devotes space to the stocks that will benefit from the forecast recovery. CAT is a symbol of the need to build in the energy , mining and construction sectors we see benefiting most from the economic recovery momenetum .
Credit Suisse most recent survey of private construction equipment dealers shows forecasts for a 15-20% improvement in sales consistent with last quarter, driven by replacement demand.
60% of dealers implied Q1/12 was trending ahead of expectations. Also encouraging, housing is on the path to recovery coupled with some pockets of strength in commercial construction and infrastructure (except military).
Large engines remain on fire tied to strength in power generation and oil & gas. There is less optimism on coal mining reflecting tougher emissions standards and regulatory uncertainty.
Last, most dealers ended 2011 ahead of expectations citing only modest help from bonus depreciation (i.e. there was little pull forward). While China remains challenging, dealers noted an improvement in equipment utilization over the past two weeks along with improved bidding prospects. For dealers, China is still forecast up 10% for the year.
Demand in Saudi Arabia is “through the roof” driven by oil & gas, the UAE is forecast flattish and Qatar to improve with the World Cup ahead. The Oil Sands, South Africa and broader Asia Pacific (outside China) remain very solid and are forecast up in the double-digit range.
Europe remains challenging, in particular Southern Europe. Dealers noted that Caterpillar’s market share is up broadly,reflecting improved quality and troubled competition, despite rational pricing. Lead times are improving in small equipment, now below 3 months, whereas larger equipment remains extended at 12-18 months on average, in particular excavators, mining, and D-10-11’s. Mining equipment is now further out versus Q4 with most quoting backlog through 2014 despite recent concerns of slowing.
Bottom line: “Doug Oberhelman (Chairman & CEO) is getting it done” by most all dealers