This Industrial Giant Reporting Thursday Has a ‘Must-Listen Earnings Call,' Portfolio Manager Says

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Caterpillar earnings are on deck Thursday morning, and one question on investors' minds could be how a slowdown in China has impacted the business.

The industrial giant generates a quarter of its sales from the Asia-Pacific region. China, the world's second-largest economy, reported 4.9% growth in third-quarter GDP — that fell short of estimates for 5.2% growth.

"I think this is a must-listen earnings call for everyone, whether you own Caterpillar or not, because they sit right in the cross-section of this really unique environment that we're in," John Petrides, portfolio manager at Tocqueville Asset Management, told CNBC's "Trading Nation" on Wednesday. "We're going to get color on where China is."

But, it's not just how the company fared in China that should prove illuminating to investors.

"The end market that Caterpillar sells into is doing really strong. Think of the commodity producers, the homebuilders, construction, all of that's doing really well. At the same time, will Caterpillar even have any inventory to sell into because of supply chain issues, because of the chip shortage? And on the other side, will companies even have labor to buy to fill trucks?" Petrides said.

Analysts surveyed by FactSet expect Caterpillar to report $2.20 a share in profit in the three months to September, up from $1.34 a year earlier. Sales are forecast to have risen 27% to $12.56 billion.

"We believe the whole industry will continue to thrive," Michael Bapis, managing director at Vios Advisors at Rockefeller Capital, said during the same interview. "In some form or fashion, the infrastructure bill is going to happen, and as we all know here living domestically the roads, the bridges, the tunnels are in dire need of updating."

Roughly half of the sector is set to report results in the next week and a half — some of those companies include Stanley Black & Decker, Rockwell Automation and Cummins.

"It is a must-watch earnings season for all the industrials, and I think what they say not only with the earnings but the outlook will be most crucial part of what the future brings for all these companies," Bapis said.

Industrial earnings are expected to have rebounded this year from the depths of the pandemic in 2020. Analysts expect full-year profit of $31.42 a share for the sector, up from $15.54 a share last year.


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