Option Millionaires

[uranium-pinto-beans]

once reality sinks in it will drop. already started to today after just about touching $35. CAT won't make more than $1.25/share this year and maybe $1.30 next year.

In 2008 they made $5.02/share and $5.37 in 2007. Do the math on the PPS at those stages and compare the EPS to $1.25. At CATs 52 week high of $85 the p/e is 17 given a $5 eps. 17 *1.25 = $21.25

I know its not as simple as that. The divi, assuming it remains, helps prop the stock. But their debt was just downgraded today, so that doesnt help things.

People are buying CAT because they know when this "great recession" is finally over CAT's earnings could pop significantly. But to think they'll ever hit the $8 - $10 EPS that they had forcasted for 2010. More like $4 - $4.50 which makes CAT nothing more than a $40 stock a few years from now.

BArclays Cap note after CAT earnings --->


Investment Conclusion
CAT's 1Q09 earnings offered a conundrum, with a
strong beat on better than expected revenues and
Engine margins, but a sharp reduction to guidance
that suggested a waning backlog in longer-cycle,
higher margin businesses. However, in spite of a
business mix that we view as later cycle than in
past downturns, management suggested that
FY09 could represent a trough; we believe this
commentary helped define the stock's ability to
shake off the guidance reduction and outperform
the overall market.
Summary
􀂉 We are reducing our FY09 EPS est by $0.10 to
$1.10, below the mid-point of guidance of $1.25.
We maintain FY10 EPS at $1.25, based on our
view that in spite of continued top line declines,
cost efforts could drive y/y EPS growth.
􀂉 Mgt indicated that the outlook began to stabilize in
April, but we believe "green shoots" are limited.
􀂉 We reiterate our 2-EW rating and $33 PT, which
reconciles our view that valuation is evolving from
a primary focus on trough valuation to reflect a
through the cycle multiple on normalized earnings.
We continue to believe we could see near term
pressure on shares based on the view that the
worst is yet to come over the next few quarters.