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Stock Market Today: These Earnings Expose a Huge Concern for 2013

By , Money Morning •

The stock market today opened lower as yet another American corporation, Caterpillar Inc. (NYSE: CAT), disappointed investors with its earnings call.

Here's the market roundup, along with one stock that is soaring today because analysts say there is a "50% chance" it could be acquired.

  • Caterpillar lowers earnings outlook for second time this year- The world's largest construction maker reported third-quarter earnings that beat expectations but cut its 2012 sales and earnings forecasts. CAT joins a growing list of American firms including McDonald's Corp. (NYSE: MCD), Google Inc. (Nasdaq: GOOG), and General Electric Co. (NYSE: GE) that have either missed expectations or lowered their outlook this earnings season. Caterpillar reported third-quarter net income of $1.7 billion, or $2.54 per share, compared with $1.14 billion, or $1.71 per share a year ago. Adjusting for one-time items CAT earned a profit of $2.26 per share, ahead of analysts' estimate of $2.22. The troubling facts for CAT include its order backlog fell 18% from the second quarter of this year and the Peoria, IL-based company now expects to generate much lower sales for the remainder of this year and 2013.

The company currently estimates it will generate net income between $9 and $9.25 per share on sales of $66 billion for fiscal 2012. This is down from a July forecast calling for EPS of $9.60 on revenue between $68 and $70 billion. In 2013 the company said its revenue could range between 5% higher or lower than this year's results. "The biggest concern is the declining backlog, which would imply a more challenging year next year, especially for mining, and whether or not North American construction will re- accelerate," Larry De Maria, a New York-based analyst for William Blair & Co. who has a buy rating on the shares, told Bloomberg News today in a telephone interview. "Caterpillar's business is very economically sensitive. Due to the softening of the global economy and increasing uncertainty, order rates have declined." After a bad start in trading today CAT stock has rebounded and is up 1.1% as of noon.

While earnings have taken their toll on corporate giants, this stock is up almost 30% today on hopes of a buyout:

  • Supervalu Inc. (NYSE: SVU) surges as leveraged buyout chances increase- Supervalu, the Eden Prairie, MN-based grocery chain, finally has good news for investors. After seeing Supervalu stock fall more than 70% this year some had thought it would be hard to attract a buyer. But the company says it has been actively seeking a buyer since July and has talked to several interested parties. In fact, an analyst at JPMorgan said that there is now a 50% chance of a leveraged buyout taking place. SVU stock is up 29% on the news.

And finally, something to keep an eye on after market close:

  • Marissa Mayer's first earnings call as Yahoo! Inc. (Nasdaq: YHOO) CEO- After the markets close today, Yahoo will report its third-quarter earnings and give newly appointed CEO Marissa Mayer a chance to talk about her plans for reviving the company. Since taking over as CEO in July, Mayer has been busy discussing possible acquisitions and new hires that will transition the company away from media content and back to its fundamentals: technology and Internet tools. Not only that, just three weeks ago she gave birth to her first child, a baby boy. Investors will want to pay close attention to what Mayer says later today regarding her turnaround plans. According to Yahoo sources who spoke to Reuters,Mayer wants to rejuvenate sites such as Yahoo Mail, Yahoo Finance, and Yahoo Sports while making Yahoo more interactive on PCs and mobile devices. "Every CEO needs time to have their full vision articulated and understood," Dan Rosensweig, a former Yahoo chief operating officer, told Reuters "To count Yahoo out would be an enormous mistake, because the users have not counted Yahoo out. It's not like MySpace, where all the users went away." On average analysts expect the company to report earnings of 25 cents per share on revenue of $1.08 billion. YHOO stock was down 0.35% as of noon.

The Dow Jones was down 24 points, or 0.18%, and the S&P 500 was down 3.02 points, or 0.21% as of noon.

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