February excavator sales showed a strong increase, driven by an easy comparison from the February Chinese New Year last year. We had expected a strong February report, but the spring selling season will determine the cadence of growth for the year. Smaller capacity excavator growth (71%) outpaced larger excavators (37%). Caterpillar again outperformed the industry, with sales up 94% year-over-year in February.
Caterpillar’s overall market share of 10.3% was 210 basis points higher than last year. In the 20-ton-plus category, Caterpillar’s market share was roughly 14%, which was about in line with results posted the past several months. Caterpillar’s market share (about 8%) in smaller excavators showed a slight uptick month-over-month. While market share statistics vary from month to month, Caterpillar has shown a trend of increasing market share since 2012.
We believe that Street expectations are for the market to be roughly flat this year. The spring selling season will be the main determinant of this year’s volume change. Concerns over the shadow banking system and slowdown of economic growth continue to weigh on China. Many excavator loans have gone delinquent, and heightened lending restrictions could cause sales to drop. However, there appears to have been looser loans in the smaller-excavator category.
Caterpillar outperformed in China in 2013, partly because of its market share gains and also because of easier comparisons. Caterpillar’s 2013 sales in China were roughly $3.5 billion, up 20% year-over-year. Caterpillar’s excavator retail sales were up roughly 25% in 2013, compared with a 3% decline in in the industry. In our coverage universe, Cummins (CMI $143.07; Outperform) is also exposed to the market with its off-highway engines, but the company is not factoring in any meaningful growth for 2014.
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