Analysts from Deutsche Bank and William Blair weigh in on Apple Inc. (NASDAQ:AAPL) and Caterpillar Inc. (NYSE:CAT) in light of earnings season. While one analyst remains neutral on Apple, citing disappointing earnings, the other is bearish on Caterpillar due to international declines.
Analyst Sherri Scribner of Deutsche Bank weighed in on Apple shares following the company’s Q1:2016 earnings release earlier this week. The analyst states both positive and negatives regarding the report. She starts by stating that Apple’s results were in-line with expectations, although March guidance indicated a “significant decline” in y/y iPhone sales, which will have a negative effect on the company’s overall FY16. On the bright side, Apple reported 8% y/y constant currency revenue growth, record Android to iPhone switch rates, and 1 billion active installed devices. However, the company also reported declines in unit shipments, specifically in the Americas, as well as declines in gross margin, representing “possible saturation” of its largest market.
Going forward, the analyst’s concerns include “lack of growth in iPhone units this year, the slowdown in China sales, and grow margin pressure from FX.” Regarding shares, Scribner does not believe the stock price will rise significantly anytime soon. The analyst states that the company’s “recurring revenue story” mirrors that of “other mature, services-type companies.” She also expressed concern regarding management’s comments about the declining Chinese economy.
As a result of earnings, Scribner reiterated a Hold rating on the company yesterday with a $105 price target and lowered her sales and EPS estimate for both FY16 and FY17.
According to TipRanks’ statistics, out of the 38 analysts who have rated the company in the past 3 months, 32 gave a Buy rating, 1 gave a Sell rating, and 5 remain on the sidelines. The average 12-month price target for the stock is $135.47, marking a 45% potential upside from where shares last closed.
Analyst Lawrence De Maria of William Blair recently expressed his views on Caterpillar prior to the company’s Q4:2015 earnings report, set to release today before market open. The analyst cites an overall decline in all of the company’s markets and segments. He specifically points to weak overall trends in North America, including backlog issues and a tough commodity business environment.
He explains that a “weak north America market [represents] a generally soft capital goods environment and weakness in oil and gas related businesses” despite the positive March and May comps, which he attributes to “catch up.” The company faces other issues such as weak demand and macro-environmental issues in Latin America, as well as market share concerns. The analyst believes these declines will continue into next year and states lowered consensus expectations.
The analyst also expressed bearishness regarding energy and transportation sales, which started to decline in April after eight months of steady growth. De Maria believes this decline stems from “general weakness and other factors such as low commodity prices,” as well as “the emissions changeover.” While he believes that international demand may “lend some support,” the company’s overseas markets are generally weak. He also predicts future declines in oil and gas sales “as Caterpillar works off its backlog.”
Yesterday, the analyst reiterated a Market Perform rating on the company with a $60 price target. According to TipRanks, the analyst has a 32% success rate recommending stocks with an average loss of 7.8% per recommendation.
Out of the 3 analysts who have rated the company in the past 3 months on TipRanks, 2 are bearish while 1 remains on the sidelines. The average 12-month price target for the stock is $47.33, marking a 19% downside from where shares last closed.