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Caterpillar's disappointing earnings good for Jim Chanos

July 24, 2013: 2:12 PM ET

Click the chart to track shares of Caterpillar.

It's looking like a good day for at least one famous short seller.

Just a week after hedge fund investor Jim Chanos announced he was betting against Caterpillar, the industrial equipment maker reported disappointing earnings and cut its outlook for the year.

The bad news sent shares of Caterpillar (CAT) nearly 3% lower Wednesday. The stock trimmed some of the losses as they day went on, but remained down 1.7% in the afternoon.

Related: Jim Chanos: Caterpillar is doomed

Sales in the division that mainly makes mining equipment fell more than 30% last quarter. That probably didn't surprise Chanos, who predicted that Caterpillar would be hurt by the end of the commodities and mining boom, during a speech at the CNBC Delivering Alpha conference last week.

Chanos, founder of Kynikos Associates, is best known for his bet against Enron.

Caterpillar's weak results and Chanos' win gave traders on StockTwits plenty to chat about.

 investinthebest
$CAT chanos is making it big today with short http://stks.co/rLQ9

 ctymkiw
Chanos' dour Caterpillar prediction proving wise. $CAT missed forecasts and lowered its outlook. But it said business in China picking up.

Business in China may be picking up, but that's starting from a pretty weak spot.

Caterpillar said it expects China's economy to grow around 7.5% this year, with industrial production rising 9%. While those growth rates are slower than predictions made earlier in the recovery, the company expects they will lead to more construction and commodity use.

While Caterpillar was somewhat optimistic about China, traders were not.

 Vconomics
$CAT missing estimates was expected. Look at the recent Chinese data ... do you think they are buying equipment in that environment?

That'a a fair point. Earlier Wednesday, a report from HSBC showed that manufacturing in China continues to decline.

 reformedbroker
$CAT's a hot mess. Management is not in control of the demand situation, they can only cut costs and lay people off.

Yikes. Traders don't seem to have much hope for Caterpillar, and they're cautioning against rival CNH Global (CNH), too.

 EquitiesResearch
if you missed bear play on $CAT, you can walk over to $CNH who reports next wednesday, should be following cat lower Bearish

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Hibah Yousuf
Hibah Yousuf
Reporter, CNNMoney

Hibah Yousuf is a reporter at CNNMoney, where she covers stocks, bonds, commodities and currencies trading across the globe, as well as corporate earnings and other markets-related news. Prior to joining the site in 2009, she interned at Money Magazine.

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