CAT - Investors Seem Unbothered By A Potential Cyclical Decline In Komatsu's Business
2024-06-21 12:42:15 ET
Summary
- Komatsu's markets show signs of emerging weakness, with construction markets in Western regions declining and mining equipment demand expected to soften in 2024/25.
- Management has sound strategies for growth in emerging and developed markets, including localized pricing, automation, and electrification.
- Komatsu is looking to its tunnel boring technology to drive long-term growth in hard rock mining, an area where it is under-exposed relative to rivals.
- Despite healthy long-term growth potential, I'm not eager to invest in Komatsu ahead of what could be a brief cyclical correction and lower guidance/expectations.
Investors are usually frightened by cyclicality, or at least the risk of a peaking cycle that is about to roll over. And yet, even though most of Komatsu ’s ( KMTUY ) markets are showing some evidence of emerging weakness, and management themselves guided to slightly softer sales in the next fiscal year, the shares remain within 5% of an all-time high....
Investors Seem Unbothered By A Potential Cyclical Decline In Komatsu's Business