Why I Am Avoiding These Three Stocks (NYSE:CAT, NYSE:CMI, NYSE:DE)

threeMitchell Clark: Deutsche Bank just issued new “Buy” ratings on Caterpillar Inc.(NYSE:CAT), Cummins Inc.(NYSE:CMI), and Deere & Company(NYSE:DE), which is quite a bold move. It’s an early call on a sector turnaround. All three of these companies recently announced mediocre fourth-quarter earnings. Deere & Company expects its total sales to decline this year.


Caterpillar really hasn’t done anything on the stock market for the last couple of years, and Cummins has actually been kind of volatile on declining trading volume. Cummins is the outperformer among these stocks by a wide margin.


Anytime you get large, industrial equipment manufacturers being upgraded, it postulates a view that global economic growth is about to accelerate.


Whether this happens or not, it’s actually very useful to read what Caterpillar, Cummins, and Deere & Company have to say about their businesses. All three companies have tried to keep their earnings elevated in the face of weak or declining top-line growth.


Cummins’ largest customer (12% of total sales) is PACCAR Inc(NASDAQ:PCAR), which manufactures “Kenworth” and “Peterbuilt” trucks domestically, and “DAF” trucks for Europe and other international markets.


Cummins’ 2013 global sales were down slightly not only from 2012 but also from 2011. Management said that it expects market share gains in North American medium-duty trucks, but domestic and international mining markets as well as foreign currency instability are headwinds for earnings.


Caterpillar recently turned higher on the stock market, but the company’s most recent quarter wasn’t



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