Zacks Investment Ideas feature highlights: Caterpillar, Terex, Joy Global and Westport Innovations

Zacks Investment Ideas feature highlights: Caterpillar, Terex, Joy Global and
                             Westport Innovations

PR Newswire

CHICAGO, Oct. 24, 2012

CHICAGO, Oct. 24, 2012 /PRNewswire/ -- Today, Zacks Investment Ideas feature
highlights Features: Caterpillar (NYSE:CAT), Terex (NYSE:TEX), Joy Global
(NYSE:JOY) and Westport Innovations (Nasdaq:WPRT).


Forget CAT – Grab These Tigers by the Tail

Before the open on Monday 10/22/12, Caterpillar (NYSE:CAT) reported earnings
for the third quarter of 2012. The beat of expectations contained a few
one-time items and when we back out the options expense we see that the
company beat expectations by $0.06 or about 2%.

While CAT is a Zacks #5 Rank (Strong Sell) there are still lots of things we
can learn from the conference call. So a quick review of what was said on the
CAT conference call: 1. dealers stating they have too much inventory, 2. 2/3
of lower guidance is due to construction and 1/3 for mining and power systems,
3.Europe is going to be weak and China won't see growth until new year.

The 800 lb. gorilla in the space is a Zacks #5 Rank (Strong Sell), so it is
not too surprising that most of the names in the group do not carry the
coveted Zacks #1 Rank.


Let's start with Zacks #3 Rank (Hold) Terex (NYSE:TEX) which is more focused
on cranes and aerial work platforms than the monster earth moving vehicles
that CAT makes. Since construction isn't that much of a concern and they have
limited exposure to mining and power systems the weakness from CAT may signal
that a buying opportunity for TEX.

Over the last three quarters, TEX has shown some outstanding earnings
momentum. Starting with a $0.01 beat in the December 2011 quarter, the company
has delivered strong beats on an absolute and percentage basis. The March 2012
quarter saw a beat of $0.06 or 26% ahead of the Zacks Consensus Estimate.

The most recent quarter was a blowout, with the company reporting earnings of
$0.75, or $0.26 ahead of the Zacks Consensus Estimate. The beat of 53% was a
big driver for the stocks 27% move the following day.

Now the company is slated to report again, and analysts may be a little low
with their expectations. In the most recent quarter, analysts were expecting
$0.49 and now they are looking for $0.50. When we look back to last year, we
see that the company had a solid beat of $0.08 or 36% ahead of the Zacks
Consensus Estimate in the third quarter of 2011.

Terex is slated to report earnings on 10/24/12 after the close with its
conference call being held the following morning.

Joy Global

Another name that is going to be impacted by the CAT Joy Global (NYSE:JOY).
The company is much more focused on mining, and with that being a direct cause
of the tempered growth rates, a deeper look is warranted.

Over the last four quarters, JOY has produced three misses and one positive
earnings surprise. The beat came in the April 2012 quarter where the company
reported earnings per share of $2.04, $0.09 or 4.6% ahead of the Zacks
Consensus Estimate. Despite that beat, shares traded lower by 5.6% in the
session following the report.

In fact, over the last four quarters the stock has dropped following each of
the earnings releases. The October 2011 quarter saw the stock fall by 12% in
the session following the release. The January 2012 quarter saw a 4.6% decline
and the most recent quarter saw a 2% slide in the next trading session.

We have heard about a larger slowing cycle for the miners, and most of that is
coming from the weaker demand in China. Their boom cycle of outrageous GDP
growth is tuning to bust, and the miners are among the first to feel the pain
of a huge source of demand basically going into shut down mode.

The valuation picture for JOY be an even bigger trap than a shut down mine.
Yes the metrics are well below the industry average, but the industry and the
company are likely to experience slower growth over the next several quarters.

The revenue estimates tell the tale that the last quarter was likely the peak
for the industry. The company saw growth from 2Q11 to 3Q11, but for 2Q12 to
3Q12, the estimates are calling for a sequentially lower number. 3Q12 vs. 3Q11
will still show growth, but it's becoming clear that future growth will be

Finally we have a play that is a little bit of a reach, but could be the wave
of the future.

Westport Innovations (Nasdaq:WPRT) is in the production of natural gas-based
engines. This falls in the power generation segment even though the target
market for WPRT is automotive.

WPRT is still quite small, and not even a blip on the screen when compared to
CAT. Being small can have its advantages, including a significantly stronger
revenue growth rate. The company is expected to report revenue of $101 million
for the September 2012 quarter, up more than 25% from the $80 million posted
in the year ago period.

Earnings estimates for 2012 have moved from a loss of $1.30 in July to the
current level of a loss of $1.14, an increase of 12%. Over the same time
period, estimates for 2013 haven't moved that much, inching lower by about one
penny. Analysts do see an improvement though, with earnings for 2013 projected
to come in at a loss of $0.73, which implies earnings growth of more than 35%.

The valuation metrics for WPRT are skewed seeing as the company is losing
money and will continue to do so next year. The more conservative measure of
price to book has WPRT trading at 3.9x, well above the industry average of
1.6x. Price to sales shows an even greater premium of 4.3x compared to a 0.5x
industry average.


Caterpillar earnings were positive but the outlook that was revised lower.
That type of mixed report can still provide investors with some insights as to
where you can find outperformance and where you may be disappointed. Shares of
Terex (TEX) should do well in light of the news out of CAT, but shares of Joy
Global (JOY) will likely disappoint following earnings. Shares of Westport
Innovations make take a while before reaching full potential and the weakness
from a player like CAT could be a good thing for WPRT.

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