| Snowflake Score | |
|---|---|
| Valuation | 4/6 |
| Future Growth | 2/6 |
| Past Performance | 5/6 |
| Financial Health | 4/6 |
| Dividends | 5/6 |
CAT Stock Overview
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide.
Caterpillar Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$195.60 |
| 52 Week High | US$237.90 |
| 52 Week Low | US$167.08 |
| Beta | 1.0 |
| 1 Month Change | 8.69% |
| 3 Month Change | -1.12% |
| 1 Year Change | -4.56% |
| 3 Year Change | 71.49% |
| 5 Year Change | 69.57% |
| Change since IPO | 2,557.83% |
Recent News & Updates
Caterpillar Stock: The Biggest Bull Case
In this article, I start by explaining the current economic situation. I then move on to the bigger picture, which shows a strong mining bull market, which benefits Caterpillar from multiple angles. Caterpillar is one of the best long-term machinery investments thanks to its ability to turn higher sales into strong free cash flow and, as a result, high shareholder distributions. Introduction In this article, I want to discuss a number of important things, all of which will explain why I am a big believer in owning Caterpillar (CAT) shares on a long-term basis for both income and outperforming capital gains. We will start by discussing current economic headwinds, which are pressuring shares of this Illinois-based machinery giant. However, while stock price weakness isn't fun, it is offering new opportunities for what I believe is going to be a multi-decade tailwind for Caterpillar due to accelerating demand for (rare) metals on top of secular growth in construction. Basically, demand for metals is set to explode. On top of that, it will become harder to mine high-quality metal ores, which will require more equipment. Also, ESG trends support Caterpillar as it offers multiple ESG-friendly solutions like EV machinery and autonomous mobility. When adding CAT's ability to turn high demand into shareholder value, I have little doubt that the CAT ticker remains the place to be. Moreover, even if you don't care for CAT, I hope to present a good outlook for the mining/metal industry. So, let's look at the details. Current Struggles Caterpillar is currently trading close to 5% lower on a year-to-date basis. The stock is down roughly 20% from its 2021 all-time high close to $250. It's important to discuss why that is before we dive into the longer-term outlook. The answer is based on two words: growth slowing. Various economic indicators peaked in the summer of 2021. One of them is the Empire State Manufacturing Index shown in the chart below. Whenever economic growth peaks, it does not mean that a recession is imminent. However, it does mean that (large) investors - let's go with "smart money" - start selling into strength. After all, the risk/reward for cyclical stocks like Caterpillar is best when economic growth is bottoming, not when it's peaking. New York Fed The chart above shows a very steep decline in business conditions. While one single indicator is volatile, it needs to be said that weakness is now all over the place. For example, the Philadelphia Fed manufacturing index also started to contract. The data below does not yet include August data (no release yet). Yet, we see that both current activity and future activity are now contracting. Future activity is even worse than it was during 2015 (manufacturing recession). Philadelphia Fed Looking at the graph below, we see the ISM manufacturing index (orange) and the Caterpillar share price. What we see is that whenever economic conditions peak, CAT loses steam. It does confirm what I mentioned at the start of the article, and it shows why CAT is weakening. It's simply de-risking of larger portfolios from cyclical exposure into more defensive exposure. Whenever economic growth bottoms, buyers come back, causing CAT to surge. TradingView (Black = CAT, Orange = ISM Index) The next chart also works, which compares CAT to the price of copper - often referred to as "Dr. Copper" because of its ability to "predict" economic growth. TradingView (Black = CAT, Orange = COMEX Copper) In this case, economic weakness is caused by a toxic mix of related issues. For example, supply chain issues and high inflation have "destroyed" consumer confidence. Meanwhile, the Federal Reserve is determined to aggressively hike its rates to combat inflation, even if it means hiking into economic weakness. What this means is fighting inflation by hurting demand. After all, the Fed cannot directly impact supply. So, that's why even CAT is now in a bad spot as it's truly a tricky environment for the economy in general, to put it mildly. While falling leading indicators (like the ones above) will almost certainly lead to lower economic expectations, the outlook was already somewhat weak. Using Wells Fargo's outlook, we see expectations that real gross domestic product growth will fall to a mere 1.7% in 2022 followed by 0.4% contraction in 2023 as inflation is expected to fall to 3.5% with core inflation still hovering at 2x the Fed's target. While these are expectations, it perfectly shows the challenges facing the economy. Not just in the US, I need to add here. Wells Fargo While all of this is "annoying" for shareholders of cyclical companies, it's good as it always comes with good buying opportunities. And that's what I care most about, buying quality companies at good prices. Especially when there's a great long-term outlook. This brings me to the next part of the article. Secular Mining Growth, A Huge Tailwind For CAT We just discussed cyclical demand. Lower economic expectations reduce the short and mid-term demand for all kinds of metals due to lower production of cars, homes, electronics, and other items. Longer-term, however, we're dealing with a strong secular growth trend. One way to describe secular growth is as follows: Secular growth occurs when something fundamentally changes within a sector or industry, creating a wave of new demand. Secular growth rates can be materially higher than cyclical growth rates, as secular growth depends on changes in customer behavior rather than changes in GDP. The current secular growth trend is the energy transition. In order to achieve the Paris Climate Agreement goals, global economies have to transition from carbon-intensive energy sources to renewables. In its 2022 investor presentation, Caterpillar highlighted what this means for global metal demand. In 2020, demand for key commodities was roughly 7,000 kilotons. In 2040, demand could hit 15,000 kilotons. That's roughly 3.9% compounding growth per year. Caterpillar This makes sense as sustainable energy comes with higher demand for electric cars, battery storage, wind and solar, and grid modernization. On top of that, we're dealing with a rising middle-class in key countries like India, which is set to accelerate material demand. While we can debate how "clean" these technologies really are, there is no debate that the world has chosen to go in that direction. And the numbers don't lie. The IEA estimates that an electric car uses roughly 210 kilograms of minerals per vehicle. A conventional car uses 40 kilograms. The same goes for wind and solar technologies, which require far more materials than coal and natural gas. With that said, the expected 2040 demand under the STEPS and SDS scenarios predicts a significant shift (and increase) in metal demand. STEPS is basically what demand will look like if we continue the current adoption rate of renewables. The SDS scenario is required in order to reach the Paris Climate Agreement goals. What we are dealing with is that more than 40% of copper demand will be used in "clean" technologies. The share of lithium is set to rise to 90%. The same goes for other metals that are often hard to mine. If you want a visualization of these trends, please visit page 7 of the IEA report. I cannot share their chart due to copyright reasons. Moreover, I believe there is another angle to this already juicy bull case: geopolitical risks. Right now, European countries are debating on how to accelerate the energy transition to become independent from the Russian energy supply. The problem is that going all-in on renewables means becoming dependent on whoever supplies key materials. Right now, that's China. Using the EV supply chain as an example, China dominates material processing of almost every single key material. According to the IEA: China dominates production at every stage of the EV battery supply chain downstream of mining. Three-quarters of battery cell production capacity is in China, with the same for the specialized cathode and anode material production, for which China accounts for 70% of cathode and 85% of anode material global production capacity. Over half of global raw material processing for lithium, cobalt and graphite also occurs in China. With 80% of global graphite mining, China dominates the entire graphite anode supply chain end-to-end. As the chart on page 28 of this presentation shows (no chart in this article due to copyright reasons), China's influence can be reduced significantly in all key materials on a long-term basis. The geographical distribution of mineral extraction is unlikely to shift significantly in the near term given today’s project pipeline. However, when comparing current mining production to mineral reserves (reserves refer to the resources which could be economically extracted at the time of determination), there appears to be significant unrealized potential for diversification of extraction in the longer term. While this is a long-term trend, I think this is necessary as no country can be allowed to dominate any energy-related supply chains. Hence, I believe that we will encounter a wide range of small-scale mining operations in various countries. It will be capital intensive, but a huge win for providers of mining equipment. Additionally, I believe that buying equipment providers is better than buying small(er) miners anyway as these miners often come with significant risks like production and local political risks - most miners will be located in countries with less-than-optimal political stability, to put it mildly. While both the secular growth trend in metals and more diversified mining will cause mining equipment demand to accelerate, we also need to incorporate lower ore quality. Using the bigger metal in terms of mined volumes, copper, we're dealing with a 30% increase in material to mine an equal amount of copper in the 10 years ahead according to Caterpillar. Caterpillar With all of this in mind, what can we expect in terms of mining equipment sales? According to research conducted in 2021, the global mining equipment market share could reach $393 billion in 2030. That's up from $153 billion in 2021. That's 9.9% annual compounding growth. Precedence Research According to Precedence Research, growth drivers will be an increase in urban population, which pushes up demand for both oil and natural resources. Over the next 20 years, emerging economies in Asia and Africa will account for more than 50% of the global urban expansion. This means more local industrialization and a higher need for metals. The key takeaways of this public report were: - Asia Pacific mining equipment market was valued at USD 36.71 billion in 2021 and is expected to grow at a CAGR of 6.2% from 2022 to 2030. - The underground mining equipment segment is expected to grow at a CAGR of 15.3% from 2022 to 2030. - By application, coal segment was accounted 38% revenue share in 2021. - The surface mining equipment market reached USD 34 billion in 2021. - The metal mining application is expected to grow at a CAGR of 5.4% from 2022 to 2030. With that said, there's a third trend, although less important because of missing guidelines. "Sustainable" Mining First of all, ESG in mining is a tricky topic for one reason; there's no clear plan and no meaningful guidelines. According to Theo Yameogo, mining expert for EY: The journey toward sustainable mining has no maps. ESG is a moving target, and every company starts from a different place. Developing a cogent framework and setting an individual pace for adopting digital change are only the beginning. Mining and metals, an industry that works on the scale of decades, must chart future disruptions through collaboration, openness, and trust in technology and people. What matters here is that CAT is prepared for new trends in the mining industry - as well as other industries it operates in. For example, in 2025, the company will start pilot projects with customers for electric mining trucks. After 2027, electric trucks are expected to be deployed. Its partners are major mining companies like BHP, Rio Tinto, Newmont, and Teck Resources, which means exposure to all major metals and almost all major mining companies. Moreover, autonomous mining is becoming a cornerstone of CAT's capabilities. In 2023, the company is expected to have close to 900 autonomous trucks (cumulative since 2013). After 25 years of development, it now has 11 customers for its automated products operating 20 sites with 30% productivity improvements on zero injuries according to the company. Caterpillar Caterpillar has been preparing for this trend for years. In 2020, Reuters reported that autonomous driving got a much-needed tailwind from the pandemic as COVID was a major risk for metal supplies. Moreover, Caterpillar stepped up investments in autonomous driving in the years between 2012 and 2017, when the giant suffered from a long-term decline in sales due to subdued commodity prices and falling CapEx from customers. CAT Revenue((TTM)) data by YCharts Now it benefits from autonomous driving and rapidly rising demand for metals. Other Honorable Mentions While this is a mining-focused article, Caterpillar confirms that it sees high long-term growth in construction as well. After all, it's roughly 40% of total sales, depending on the year and business environment. MarketScreener Including needs for the energy transition, CAT sees between 2x and 3x growth between 2021 and 2040. Caterpillar This implies close to 4% (average) annual compounding growth across construction-related industries.
Should You Think About Buying Caterpillar Inc. (NYSE:CAT) Now?
Let's talk about the popular Caterpillar Inc. ( NYSE:CAT ). The company's shares received a lot of attention from a...
Why Caterpillar Stock Crashed In June; What Is The Outlook?
Caterpillar is a cyclical business, and down cycles can be quick and deep. Often the market anticipates down cycles ahead of time before they show up in actual reported earnings. Caterpillar likely has farther to fall before this down cycle is over. However, if purchased at the right price, Caterpillar stock can produce excellent market-beating returns. Introduction I always like to begin my articles by revisiting any past coverage I've had on a stock so readers can see how my previous expectations turned out. In Caterpillar's (CAT) case, I was surprised to find all four of my previous articles have been bearish. And this one will be no exception. However, I want to make it clear at the outset that I typically only cover stocks that I would consider buying myself if the price was right. I have relatively high quality standards, and just because I have been consistently bearish on a stock doesn't mean there is anything wrong with the business. In fact, I like Caterpillar's business a lot, and if the stock ever hits a good price, I'll be a buyer. But the price needs to be right. I like to have the potential for market-beating returns and a margin of safety, and if I pay too much for a stock I'm less likely to achieve those goals. So, let's start by reviewing CAT's performance since my previous bearish articles, and then I'll examine when I would be willing to buy the stock. Caterpillar stock will always have a special place in my heart as a stock writer because it was the first article I wrote specifically about the dangers of investing in deep cyclical stocks near their peaks, late in the economic cycle. My January 15th, 2018 article "How Far Could Caterpillar Fall?", in many respects started my investment writing career. It's interesting to reread my process at the time, nearly five years later, but my "optimistic" scenario for CAT's stock price back in early 2018 was pretty close to spot on. Then let's say that after these three years of gains, the economy turns down and Caterpillar loses 45% of its value, which is very typical for Caterpillar historically. That would put Caterpillar's price at $140.25 per share. If we assume the drop will be similar in nature to those of the past it will take 12-18 months to bottom, so one would be 4-5 years into their investment from today and be sitting on significant losses. And it still may take another year or two from this point just to get back to even if history is any guide. So, in a pretty optimistic scenario, a Caterpillar owner here at $170 per share may be looking at a 5-6 year investment breaking even. Here we are 4.5 years later and CAT is sitting at $178 per share. Here are the total returns compared to the S&P 500 since the article came out: Data by YCharts CAT was underwater for about three years. It did indeed fall -45%, and has underperformed the index the entire period. Overall, it was a pretty good warning article. I also, continued to warn investors that CAT stock could fall farther, even after the stock had dropped a lot. So let's take a look at that article as well. It was written one year later, on January 19th, 2019 and titled "Understanding Caterpillar, The Cycle, And Why It Fell". While I rated CAT stock a "Sell" I was reasonably constructive in the article and shared two potential entry points for the stock. For investors in cash waiting to buy CAT with a margin of safety, I would aim for about a $94 entry point on my first position (1% portfolio size). And for investors still holding CAT, I shared my numbers, and I think there is still more risk to the downside, but it's a lot less than last January. You can judge for yourself based on the numbers. CAT would eventually hit that first $94 buy price in March of 2020, but, given what was going on at the time, I was only personally using my "deep recession" buy prices, so I didn't buy the stock because it didn't fall enough for a deep recession. All things considered, CAT stock has still underperformed the index since that January 2019 article was written, even though it has produced decent absolute returns. Data by YCharts And this brings us to my most recent CAT article, earlier this year, when I thought we were probably near a peak for CAT stock again, and I issued a fresh bearish warning on the stock on February 1st, 2022 "How To Capitalize On Caterpillar's Future Price Decline". Data by YCharts Since that article CAT is down about -12%, which is similar to the S&P 500, but the decline since June has been breathtaking fast. Overall, I think I have produced good articles on CAT despite being pretty bearish most of the time. In this article I want to warn investors again, specifically about using earnings and P/E ratios to value cyclical stocks when they are falling rapidly off their peaks, as CAT is doing now. In my opinion, the next few months will be one of the most dangerous times to buy Caterpillar stock because it's likely to look like a tremendous value when it isn't. Categorizing a "Deep Cyclical" Stock When I analyze any stock the first action I take is to see how much history the stock has as a publicly traded company. After that, provided they have enough of a history, I check to see how much their historical annual earnings per share have fluctuated over the years. This helps me determine whether a stock is a "deep cyclical" or not. FAST Graphs In the FAST Graph above, the dark green shaded area represents earnings per share. I have circled the years in which earnings per share growth was negative. While Caterpillar's overall earnings trend is up over the past 20 years, there have been seven of those years where EPS growth was negative. I consider declines in EPS growth of -50% or more "deeply cyclical", and CAT's were deeper than that in the Great Recession in 2009 and also in the industrial recession in 2015/6. During COVID, they fell about -40%, but quickly recovered. In many respects CAT is an ideal cyclical stock to invest in. Overall, it's not too dangerous because earnings typically bounce back within a few years, and, during the past two decades, they have never gone totally negative. However, the price can often sell off deeply, which gives investors a chance to buy the stock at a decent price every now and then. This can allow investors who know what they are doing to get outsized returns over 2-5 years without taking on excessive risk. However, the catch is that investors who want market-beating returns, have to buy at the right price, and often CAT can look attractive based on earnings when the stock price still has a lot of downside. This can cause many investors to buy at a price that is too high to produce really great returns, and that is not ideal. FAST Graphs In the FAST Graph above, I highlighted some particularly enticing historical P/E ratios for Caterpillar. All of them are much lower than the P/E ratio of 15.22 where the stock trades today. With businesses that are less cyclical, low P/E ratios often correspond to superior medium and long-term returns. However, the opposite is often true with more cyclical businesses like Caterpillar. Below are the total returns from the data points highlighted in the FAST Graph above compared to the S&P 500. Data by YCharts The first entry point was from September of 2008. This entry point produced average returns on both an absolute and relative basis compared to the index, but with considerably more volatility. Data by YCharts The second entry point in November of 2012 produced good absolute returns, but significantly underperformed the index and also experienced a lot more volatility. Data by YCharts And the third entry point from April of 2019, produced mediocre absolute returns and underperformed the S&P 500 index. I'm sure there are going to be some investors out there who would be happy with a 10% CAGR over the past 15 years, and they perhaps don't mind that they would have also had much deeper drawdowns than simply owning the index. I am not one of those investors, though. And, if we are being honest, I don't think most of the investors who were buying Caterpillar stock when its P/E looked "cheap" during these times were aiming for below market or average returns. Personally, I aim for medium-term returns in 15-20% CAGR range at the portfolio level, and when I invest in a deep cyclical stock like Caterpillar, I typically aim for a 100% return within five years or better. Since I never count on a cyclical stock trading any higher than its previous cyclical high, that means I usually need to buy a deep cyclical at least -50% off its cyclical high, so that if it takes a full five years to recover, then I'm still in my 15-20% CAGR return range. Usually the pushback I get from readers regarding my goals and buy prices is that the market will never give me the prices I'm looking for. And for some stocks that is absolutely true. They never end up trading at prices that I can confidently predict good medium-term returns from. But that's okay, as long as there are other stocks that do hit my buy prices. So, while Caterpillar hasn't fallen enough for me to buy during the past five years, there are other industrial stocks that have. During the March 2020 crash, I bought two industrial stocks in my marketplace service, The Cyclical Investor's Club, that were deep cyclicals and had similar characteristics as Caterpillar. One was Kennametal (KMT), and the other was Astec Industries (ASTE). I bought them both on 3/16/20, and I have already taken profits in both of them since they reached my return goals. Here is how they performed during their respective holding periods compared to both SPY and CAT if purchased and sold on the same dates. Data by YCharts Little-known Astec Industries actually produced better returns than the well-known Caterpillar during my holding period and in just over a year I made +150% return. Data by YCharts In Kennametal's case, I would have been better off buying Caterpillar than KMT, but I still got a double in 15 months, and most importantly the market gave me the opportunity I was looking for with KMT while CAT just missed my buy price in March 2020. What is important to compare, here, is that anyone who bought CAT stock in 2018 and 2019 severely underperformed an investor who bought CAT or similar stocks like KMT and ASTE when they were actually deep in a downcycle. And downcycles, while they are all different, regularly occur with these stocks, so it's almost always worth waiting for them before one buys. CAT's historical price patterns Because CAT's earnings are deeply cyclical it causes the P/E ratio often used by investors as a valuation tool to not be very accurate predicting medium and long-term returns. In order to deal with this problem when it comes to cyclical stocks I use historical price patterns instead of earnings as a guide for when to potentially buy a stock. Once we control for a few additional factors, we can then examine the stock's historical drawdowns and make a rough estimate of what we might expect during a future drawdown. Data by YCharts Above is a long-term price drawdown chart for CAT. Below is a breakdown of the deeper drawdowns to give us an idea of CAT's general patterns over the long-term. ~Year ~Time Until Bottom ~Duration ~Depth 1973 12 months 2 years -48% 1981 14 months 6 years -60% 1987 6 months 5 years -48% 1999 17 months 5 years -53% 2007 18 months 4 years -74% 2014* 16 months 3 years -50% 2018 26 months 3 years -46% 2022 13 months** ? -30%** *2014 was not a full recovery to the 2012 highs, but it was very close. **So far this downturn. Every cycle is a little different so examining past downturns is really just a way to get us in the right ballpark so we have an above average chance at achieving above-average returns after we buy the stock. If we examine the last three recessions and downcycles since 1999, we can see that the typical downcycle usually causes Caterpillar's stock price to fall about -50% off its highs. During the 2018-2020 downcycle, CAT stock only fell about -46% off its highs, which is why I missed buying it during that downcycle. That's okay. The estimate was still pretty good and if the Federal Reserve would have acted a day later issuing its "whatever it takes message" in March of 2020, then CAT probably would have fallen below that -50% level the next day, and I would have picked it up.
Shareholder Returns
| CAT | US Machinery | US Market | |
|---|---|---|---|
| 7D | -0.6% | 1.4% | 1.4% |
| 1Y | -4.6% | -6.9% | -8.4% |
Return vs Industry: CAT exceeded the US Machinery industry which returned -6.9% over the past year.
Return vs Market: CAT exceeded the US Market which returned -8.4% over the past year.
Price Volatility
| CAT volatility | |
|---|---|
| CAT Average Weekly Movement | 5.2% |
| Machinery Industry Average Movement | 5.8% |
| Market Average Movement | 7.6% |
| 10% most volatile stocks in US Market | 17.1% |
| 10% least volatile stocks in US Market | 3.1% |
Stable Share Price: CAT is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.
Volatility Over Time: CAT's weekly volatility (5%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1925 | 107,700 | Jim Umpleby | https://www.caterpillar.com |
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide. Its Construction Industries segment offers asphalt pavers, backhoe loaders, compactors, cold planers, compact track and multi-terrain loaders, excavators, motorgraders, pipelayers, road reclaimers, site prep tractors, skid steer loaders, telehandlers, and utility vehicles; mini, small, medium, and large excavators; compact, small, and medium wheel loaders; track-type tractors and loaders; and wheel excavators. The Resource Industries segment provides electric rope shovels, draglines, hydraulic shovels, rotary drills, hard rock vehicles, track-type tractors, mining trucks, longwall miners, wheel loaders, off-highway trucks, articulated trucks, wheel tractor scrapers, wheel dozers, fleet management, landfill compactors, soil compactors, machinery components, autonomous ready vehicles and solutions, select work tools, and safety services and mining performance solutions.
Caterpillar Fundamentals Summary
| CAT fundamental statistics | |
|---|---|
| Market Cap | US$103.26b |
| Earnings (TTM) | US$6.76b |
| Revenue (TTM) | US$54.03b |
15.3x
P/E Ratio1.9x
P/S RatioIs CAT overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| CAT income statement (TTM) | |
|---|---|
| Revenue | US$54.03b |
| Cost of Revenue | US$38.16b |
| Gross Profit | US$13.51b |
| Other Expenses | US$6.76b |
| Earnings | US$6.76b |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 12.80 |
| Gross Margin | 25.01% |
| Net Profit Margin | 12.50% |
| Debt/Equity Ratio | 234.5% |
How did CAT perform over the long term?
See historical performance and comparisonDividends
2.5%
Current Dividend Yield36%
Payout RatioValuation
Is CAT undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
4/6Valuation Score 4/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast
Key Valuation Metric
Which metric is best to use when looking at relative valuation for CAT?
Other financial metrics that can be useful for relative valuation.
| What is CAT's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$103.26b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 2.5x |
| Enterprise Value/EBITDA | 12.8x |
| PEG Ratio | 2.1x |
Price to Earnings Ratio vs Peers
How does CAT's PE Ratio compare to its peers?
| CAT PE Ratio vs Peers |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 16.3x | ||
PCAR PACCAR | 14.8x | -2.4% | US$32.8b |
CMI Cummins | 15.8x | 11.1% | US$32.5b |
WAB Westinghouse Air Brake Technologies | 27.2x | 12.8% | US$17.2b |
ALSN Allison Transmission Holdings | 8x | 0.1% | US$3.8b |
CAT Caterpillar | 15.3x | 7.3% | US$104.2b |
Price-To-Earnings vs Peers: CAT is good value based on its Price-To-Earnings Ratio (15.3x) compared to the peer average (16.3x).
Price to Earnings Ratio vs Industry
How does CAT's PE Ratio compare vs other companies in the US Machinery Industry?
Price-To-Earnings vs Industry: CAT is good value based on its Price-To-Earnings Ratio (15.3x) compared to the US Machinery industry average (22.5x)
Price to Earnings Ratio vs Fair Ratio
What is CAT's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 15.3x |
| Fair PE Ratio | 26.6x |
Price-To-Earnings vs Fair Ratio: CAT is good value based on its Price-To-Earnings Ratio (15.3x) compared to the estimated Fair Price-To-Earnings Ratio (26.6x).
Share Price vs Fair Value
What is the Fair Price of CAT when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: CAT ($195.6) is trading below our estimate of fair value ($233.6)
Significantly Below Fair Value: CAT is trading below fair value, but not by a significant amount.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is less than 20% higher than the current share price.
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Future Growth
How is Caterpillar forecast to perform in the next 1 to 3 years based on estimates from 17 analysts?
Future Growth Score
2/6Future Growth Score 2/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE
7.3%
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: CAT's forecast earnings growth (7.3% per year) is above the savings rate (1.9%).
Earnings vs Market: CAT's earnings (7.3% per year) are forecast to grow slower than the US market (14.4% per year).
High Growth Earnings: CAT's earnings are forecast to grow, but not significantly.
Revenue vs Market: CAT's revenue (4.3% per year) is forecast to grow slower than the US market (7.8% per year).
High Growth Revenue: CAT's revenue (4.3% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: CAT's Return on Equity is forecast to be very high in 3 years time (46.7%).
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Past Performance
How has Caterpillar performed over the past 5 years?
Past Performance Score
5/6Past Performance Score 5/6
Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE
19.6%
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: CAT has high quality earnings.
Growing Profit Margin: CAT's current net profit margins (12.5%) are higher than last year (9.6%).
Past Earnings Growth Analysis
Earnings Trend: CAT's earnings have grown by 19.6% per year over the past 5 years.
Accelerating Growth: CAT's earnings growth over the past year (53.9%) exceeds its 5-year average (19.6% per year).
Earnings vs Industry: CAT earnings growth over the past year (53.9%) exceeded the Machinery industry 9.4%.
Return on Equity
High ROE: Whilst CAT's Return on Equity (42.88%) is outstanding, this metric is skewed due to their high level of debt.
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Financial Health
How is Caterpillar's financial position?
Financial Health Score
4/6Financial Health Score 4/6
Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage
Financial Position Analysis
Short Term Liabilities: CAT's short term assets ($42.0B) exceed its short term liabilities ($29.0B).
Long Term Liabilities: CAT's short term assets ($42.0B) exceed its long term liabilities ($36.4B).
Debt to Equity History and Analysis
Debt Level: CAT's net debt to equity ratio (197.3%) is considered high.
Reducing Debt: CAT's debt to equity ratio has reduced from 263.3% to 234.5% over the past 5 years.
Debt Coverage: CAT's debt is not well covered by operating cash flow (15.4%).
Interest Coverage: CAT's interest payments on its debt are well covered by EBIT (54.2x coverage).
Balance Sheet
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Dividend
What is Caterpillar current dividend yield, its reliability and sustainability?
Dividend Score
5/6Dividend Score 5/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage
2.45%
Current Dividend Yield
Dividend Yield vs Market
Notable Dividend: CAT's dividend (2.45%) is higher than the bottom 25% of dividend payers in the US market (1.47%).
High Dividend: CAT's dividend (2.45%) is low compared to the top 25% of dividend payers in the US market (3.97%).
Stability and Growth of Payments
Stable Dividend: CAT's dividends per share have been stable in the past 10 years.
Growing Dividend: CAT's dividend payments have increased over the past 10 years.
Earnings Payout to Shareholders
Earnings Coverage: With its reasonably low payout ratio (36%), CAT's dividend payments are well covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: At its current cash payout ratio (83%), CAT's dividend payments are covered by cash flows.
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Management
How experienced are the management team and are they aligned to shareholders interests?
3.9yrs
Average management tenure
CEO
Jim Umpleby (64 yo)
5.58yrs
Tenure
US$24,298,032
Compensation
Mr. D. James Umpleby III, also known as Jim, has been the Chief Executive Officer and Director of Caterpillar Inc. since January 1, 2017 and has been its Chairman of the Board since December 12, 2018. Mr....
CEO Compensation Analysis
Compensation vs Market: Jim's total compensation ($USD24.30M) is above average for companies of similar size in the US market ($USD12.86M).
Compensation vs Earnings: Jim's compensation has increased by more than 20% in the past year.
Leadership Team
Experienced Management: CAT's management team is considered experienced (3.9 years average tenure).
Board Members
Experienced Board: CAT's board of directors are considered experienced (6.6 years average tenure).
Ownership
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.
Recent Insider Transactions
Ownership Breakdown
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
Top Shareholders
Company Information
Caterpillar Inc.'s employee growth, exchange listings and data sources
Key Information
- Name: Caterpillar Inc.
- Ticker: CAT
- Exchange: NYSE
- Founded: 1925
- Industry: Construction Machinery and Heavy Trucks
- Sector: Capital Goods
- Implied Market Cap: US$103.259b
- Shares outstanding: 527.91m
- Website: https://www.caterpillar.com
Number of Employees
Location
- Caterpillar Inc.
- 510 Lake Cook Road
- Suite 100
- Deerfield
- Illinois
- 60015
- United States
Listings
Company Analysis and Financial Data Status
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/08/19 00:00 |
| End of Day Share Price | 2022/08/19 00:00 |
| Earnings | 2022/06/30 |
| Annual Earnings | 2021/12/31 |
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.