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Caterpillar, Joy Global Up This Year, But The China Question Lingers

Caterpillar ( CAT ) is billing it as the age of Smart Iron, a joining of iron age durability with high-tech capability. The branding is fresh, but the combination is nothing new. Earth moving equipment has, for many years been guided by satellite-using GPS equipment. For nearly as long, massive mining trucks have been evolving toward hybrid diesel-electric technology that use direct current motors for both locomotion and braking. Caterpillar’s new wrinkle is technology allowing operators to monitor the productivity of each vehicle in their fleet, and to diagnose mechanical status and receive automated readouts on upcoming maintenance. The company expects to make early announcements on the new vehicles at the Las Vegas industry show early next year. In the meantime, analysts generally remain cautious. The consensus view expects Caterpillar earnings to continue to decline this year, with a flat EPS outlook for 2017. The company last fall announced it would layoff 10,000 workers and shutter up to 20 manufacturing facilities worldwide in the next two years. But it has fought to keep up its R & D spending, preparing for the day when demand for heavy equipment – particularly from China – returns. The Peoria, Ill., mover and shaker’s Q1 results reported Friday showed earnings down 68%, below estimates in a fourth straight decline. Revenue slid 26%, a sixth straight quarter of accelerating contraction. Still, Caterpillar remains a dividend darling with a 4% yield. Its shares on Tuesday were up 36% from a January low. That leaves the stock still deep in a 22-month correction, but at a place where a legitimate base could form. As a group, construction and mining equipment makers were ahead 40% over the same period. Astec Industries ( ASTE ) climbed 45%. Terex ( TEX ) rose 73%. Joy Global ( JOY ) took a 140% gain. Astec and Joy show particularly strong recent accumulation by institutional investors. Their Relative Price Strength Ratings are also high, in the mid-90s, vs. a 77 for Caterpillar. But Astec is thinly traded, which knocks it off the CAN SLIM radar screen. Joy Global’s earnings have declined in the past 12 quarters, sending it to a loss in its fiscal Q1, ended in January. Revenue has declined for 12 straight quarters. Analyst consensus expects Joy Global’s losses to continue this year, but turn up sharply next year for a 161% earnings gain and a 0.3% gain in sales. Caterpillar and Joy Global received a boost on April 25, when Goldman Sachs upgraded the pair to neutral, from sell. The note cited firming demand in China’s construction sector, and rising iron ore prices, which could stir mining demand. But analysts also note that a large share of global mining equipment is parked. As demand rises, a healthy portion of that equipment will need to come back into service before the demand trickles through to new equipment buys.

Google Inks Driverless Car Pact With Fiat Chrysler

Alphabet ’s ( GOOGL ) Google and Fiat Chrysler Automobiles ( FCAU ) have inked a deal to collaborate, with Fiat Chrysler putting Google’s self-driving car technology into 100 of its Pacifica minivans, the companies announced Tuesday afternoon. The Google Self-Driving Car Project and FCA called it a first-of-its-kind collaboration that will expand Google’s existing self-driving test program. This marks the first time that Google has worked directly with an automaker to integrate its self-driving system, including its sensors and software, into a passenger vehicle, the companies said. The Chrysler Pacifica Hybrid minivans will be used later this year for Google’s self-driving testing, more than doubling Google’s current fleet of self-driving test vehicles, according to the press release. The said both companies will co-locate part of their engineering teams at a facility in southeastern Michigan to accelerate the design, testing and manufacturing of the self-driving Chrysler Pacifica. The agreement, reportedly non-exclusive, had been expected. Speculation over a Google-Fiat Chrysler deal had surfaced late last month. Google had earlier been in negotiations with General Motors ( GM ), but those talks reportedly stalled. GM has invested in Lyft as part of an alliance that involves autonomous efforts with the ride-hailing service. Other companies in the autonomous car race include Tesla Motors ( TSLA ), Apple ( AAPL ), Toyota ( TM ) and Ford ( F ). Apple has yet to confirm any car plans, though its intentions are seen as an open secret. In April, the company hired Chris Porritt, who had been Tesla’s vice president of vehicle engineering. He will work on Titan, Apple’s car project, say reports. A German newspaper last month said a potential Apple partner is Magna Steyr, the world’s largest contract automaker.

Fitbit Q1 Earnings Preview: What You Need To Know

Fitbit ( FIT ) is due for a health checkup late Wednesday and the prognosis for its first-quarter earnings report is looking favorable. But investors got the jitters on the eve of the company’s Q1 report. Fitbit stock fell 6.5% to 17.18 in heavy volume on the stock market today . Fitbit stock has tumbled more than 40% this year as competition has risen and the pace of growth has slowed. Analysts polled by Thomson Reuters expect the maker of wearable fitness devices to earn 2 cents a share excluding items on sales of $443.1 million. On a year-over-year basis, sales would be up 32% if it meets the consensus forecast. That would be down from 92% growth in Q4, 168% in Q3 and 253% in Q2. Fitbit made its IPO last June, pricing shares at 20. For the current quarter, Wall Street is modeling for Fitbit to earn 26 cents a share, up 24%, on sales of $532.8 million, up 33%. Pacific Crest Securities analyst Brad Erickson on Monday reiterated his sector weight, or hold, rating on Fitbit stock. Erickson expects a “beat-and-raise” quarter from Fitbit, but is cautious based on “longer-term views of poor category user trends, a lack of sensor differentiation and a more limited total addressable market.” In the near term, demand appears relatively healthy for the Fitbit Blaze smart fitness watch and the Alta activity tracker, he said. Fitbit also has stocked the retail channel with Charge HR devices for Mother’s Day sales, he said in a research report. Piper Jaffray analyst Erinn Murphy maintained her neutral rating on Fitbit with a price target of 16. “While data points during the quarter have been positive, with strong Amazon ( AMZN ) trends for the newly launched Alta and Blaze models, we remain on the sidelines behind the second-half weighted earnings (we estimate 70% of earnings lie in 2H) and given the tougher product launch comparisons in 2H,” she said in a report Monday. Mizuho Securities analyst Betty Chen kept her buy rating and price target of 20 on Fitbit stock in a report Monday. “Our recent survey highlights increases in Fitbit ownership as well as planned purchase intent at higher average selling prices,” she said. “Moreover, data indicates increased upgrade intent and attachment rate, with 21% of Fitbit device buyers purchasing at least one additional wristband in the last three months. We believe this bodes well for Fitbit’s long-term growth and margin profile.” Last week, diversified rival Garmin ( GRMN ) said its sales of wearable fitness devices rose 9% year over year in Q1, to $142.4 million, but profit margins declined because of intense competition in the category. Garmin also makes GPS navigation devices for automotive, aviation, marine and outdoor markets. In addition to Fitbit and Garmin, other companies competing in the health-and-fitness wearables sector include Apple ( AAPL ), Jawbone, Microsoft ( MSFT ) and Under Armour ( UA ). RELATED: Fitbit Bolsters China Prospects With E-Commerce Deal