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CAT

Caterpillar NYSE:CAT Stock Report

Last Price

US$185.81

Market Cap

US$98.1b

7D

-4.6%

1Y

-11.0%

Updated

08 Aug, 2022

Data

Company Financials +
CAT fundamental analysis
Snowflake Score
Valuation4/6
Future Growth2/6
Past Performance5/6
Financial Health4/6
Dividends5/6

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

Summary of all time highs, changes and price drops for Caterpillar
Historical stock prices
Current Share PriceUS$185.81
52 Week HighUS$237.90
52 Week LowUS$167.08
Beta1.0
1 Month Change3.75%
3 Month Change-8.46%
1 Year Change-11.05%
3 Year Change59.19%
5 Year Change63.41%
Change since IPO2,424.81%

Recent News & Updates

Jul 25

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.

Jul 19

Caterpillar: Dividends And A Huge Bull Case

Caterpillar has been a source of high, outperforming total returns for decades. This is likely to remain the case as Caterpillar benefits from a strong secular tailwind, high margins, and its ability to generate high free cash flow. CAT stock's valuation has become attractive as investors have priced in economic weakness. This includes a satisfying dividend yield and the company's comments that more or less promise new, aggressive buybacks. Introduction It's time to talk about the world's largest producer of construction and mining equipment. Caterpillar (CAT) has been a part of my dividend growth portfolio since 2020 when I bought the stock because it was criminally undervalued - on top of the company's qualities as a dividend growth stock, which I will discuss in this article. However, I'm not just going to dive into the company's finances, I'm also going to elaborate on a secular economic development that I believe will be a driver of headlines for years, if not decades to come. The mining industry will become more important than "ever" due to the global rush for renewable technologies and applications. Moreover, I will discuss the current economic environment and my own strategy when it comes to owning Caterpillar in an industrial-heavy portfolio. In other words, we have a lot to discuss! A Challenging Macro Environment The soon-to-be Texas-based machinery company is down roughly 30% from its all-time high reached in the first half of 2021. FINVIZ Once again, Caterpillar finds itself in a nasty drawdown. However, as bad as this one is - so far - it's nothing compared to what investors had to stomach during the 2014/2015 manufacturing recession or the Great Financial Crisis, which erased close to 75% of the company's market cap. Data by YCharts In a recent article, I discussed my view on industrial stocks, which includes Caterpillar. We're dealing with a mix of related issues like (but not limited to): Supply chain issues in almost every single industry An energy crisis (it's worse in Europe than in the US) Geopolitical tensions in Ukraine and to a lesser extent in Asia High inflation Low consumer sentiment An aggressive Federal Reserve, which is determined to suppress inflation The worst part is that, unlike prior cycles, the Federal Reserve is hiking and determined to fight inflation. As the central bank cannot influence supply chains directly (i.e., it cannot print oil, wheat, affordable labor, or make China quit its zero-COVID policy), it is determined to use the demand side to lower inflation. This means hurting demand to balance supply and demand. That's one of the reasons why stock market sentiment is far from great - to put it mildly. While industrial production is still growing at 4%, new, leading data is painting a darker picture. As I explained in the article I just mentioned, new orders in manufacturing are expected to contract while a lot of commodities remain in short supply. That's bad news for companies as it not only prevents them from quickly turning their backlog into actual sales but also slows backlog growth considerably. The good news is that a lot has been priced in. This is the chart I used comparing industrial stocks (XLI) to leading manufacturing expectations. Author This is the chart when comparing this data to Caterpillar: Author While it is hard/impossible to call for a bottom, I do like the risk/reward in a lot of industrial (and related) stocks, which is why I have been adding to some of them recently. After all, when I invest on a long-term basis, I believe it's more important to buy stocks at prices that seem very attractive instead of aiming for the perfect bottom, which often leads to not buying any stocks at all. With that said, let's discuss a trend that both I and Caterpillar highlighted in recent weeks and months: secular commodity growth. Secular Commodity Growth On June 21, I wrote an article covering metals and mining ETF (XME). My focus was on secular growth causing severe (expected) commodity supply shortages. Seeking Alpha One of the issues facing the global demand for commodities is the fact that supply isn't keeping up. It's not just the energy supply that is suffering from subdued capital expenditures, it also impacts metals. Mining.com According to Mining.com, Underinvestment in supply in recent years will impact production for at least the next decade. Over most of the last decade, commodity prices have been falling or low. Commodity producers, reacting to low prices and criticism that they had overinvested during the China-driven commodity supercycle, slashed capex significantly. The Wall Street Journal had similar findings with regard to the need for metals tied to renewable technologies (net zero): Producers have taken some steps to increase the supply of specialty materials such as lithium and cobalt that are crucial ingredients in batteries, but not enough to fill expected shortages. Despite seeing some of their highest profits in a decade, many mining executives are cautious because of rising costs for fuel and equipment, higher interest rates and challenges developing deposits in emerging markets that are seeking a greater share of industry earnings. If we use copper as an example, it is estimated that global copper supply will not even be anywhere close to expected demand in a net-zero scenario. Wall Street Journal Kitco News reports that the mining industry needs to spend $81 billion annually to 2030 just to avoid shortages to achieve net zero. Moreover, these expectations do not include any estimates of rising demand from consumers in high-growth economies - and one can imagine what a rising middle-class in emerging markets means for metals demand. According to Kitco: "The UN estimates the adaption costs at $140-300BN pa by 2030 in developing countries alone. Based on the mining CAPEX required to achieve Net Zero, although this may simplify it a bit, the return on that investment could be somewhere between +94-317%," the authors of the report said. With all of this in mind, the start of this article - Caterpillar - also commented on these issues in its 2022 investor day presentation. For example, in 2020, key commodity demand was roughly 7,000 kilotons. This number could rise to 12,000 in 2030 and 15,000 in 2040. Caterpillar Inc. Electric vehicles alone need 6x more metals than a conventional car. These numbers are truly mind-blowing. On a side note, Caterpillar expects that residential construction spending will also double by 2040. The same goes for "traditional" infrastructure spending. Moreover, additional growth opportunities for Caterpillar will come from the fact that - according to the company - it will take 30% more material in 2030 to deliver the same amount of copper that mines produce now. That's a huge number. And, bear in mind that copper is one of the most important energy transition commodities. Caterpillar Inc. It also helps that the average age of mining machinery is 11.7 years, opening up mid-term opportunities for miners to replace old equipment in an environment of high commodity prices. So far, the company has the benefit of long-term high commodity demand as well as a favorable risk/reward thanks to recent stock price weakness and slower mid-term economic growth expectations. I also believe that the dollar will start to weaken as soon as the Fed starts to sound more dovish. That could reverse the decline in copper (that dragged down Caterpillar) - especially when economic growth expectations. TradingView (Black = Copper, Orange = CAT) With all of this said, Caterpillar is more than just a cyclical stock. It has the ability to deliver significant long-term value. The Dividend Stock CAT Caterpillar is extremely cyclical. With a market cap of $92.5 billion, it's the world's largest producer of construction and mining equipment and a major producer of off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. The company has four reportable segments. Three of them are in the ME&T category, which one frequently encounters in Caterpillar's reports and presentations. It stands for machinery, energy, and transportation and it includes every single tangible product that Caterpillar produces. The fourth segment is financial products. This segment makes money from financing and insurance services. Despite its cyclical behavior, Caterpillar gains more during bull markets than it loses during bear markets - a lot more. Since 1985, Caterpillar has returned 12.7% per year, turning $10,000 into almost $780,000. This beats the S&P 500 by almost 200 basis points per year. The issue is that this comes with a 30.8% standard deviation, which is double the standard deviation of the S&P 500. Portfolio Visualizer Outperforming the market is hard, and it's even harder when operating in industries that are as cyclical as the industries Caterpillar operates in. Caterpillar's success is basically caused by its quality product portfolio that not only quality products, but also future technologies like full remote control, automation, EV applications, and connectivity. The company is able to sell these products while raising its margins. The company targets at least 300 basis points higher operating margins compared to the 2010-2016 period (this was a slow period with low commodity prices). So far, this is working out as expected. Caterpillar Inc. Thanks to higher margins, the company is consistently generating high free cash flow. In 2021, Caterpillar did $6.1 billion in free cash flow. That's 6.6% of the current market cap. As free cash flow is net income adjusted for non-cash operating items minus capital expenditures, it's cash a company can spend on buybacks, dividends, and debt reduction. TIKR.com During the past 12 years, net debt has slowly, but gradually declined. This year, the company is expected to end up with $28.9 billion in net debt. Next year, that number could be $28.0 billion thanks to $7.0 billion in expected free cash flow. $7.0 billion in FCF implies an FCF yield of 7.6%, which is a lot. What do I mean by "a lot"? It's enough to support strong dividend growth, buybacks, and debt reduction. When it comes to dividends, Caterpillar has one of the best Seeking Alpha scorecards I've seen in a long time. It scores high on everything, especially dividend growth, and consistency. Seeking Alpha On June 8, Caterpillar hiked its dividend by 8.1% to $1.20 per share. This implies a 2.8% dividend yield. The 10-year average annual dividend growth rate is 9.2%, which is more than decent for a stock that is as mature and cyclical as Caterpillar. Also, 9% per year on a current yield of 2.8% is a big deal that quickly turns 2.8% into a yield on cost that even high-yield-seeking investors will appreciate. Data by YCharts On top of that, the company is aggressively buying back shares. This has two reasons. First, it allows a company to return cash without making a big commitment like a dividend. Second, Caterpillar wants to return a lot of cash.

Jul 17
Is Caterpillar (NYSE:CAT) A Risky Investment?

Is Caterpillar (NYSE:CAT) A Risky Investment?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility...

Shareholder Returns

CATUS MachineryUS Market
7D-4.6%0.4%1.1%
1Y-11.0%-12.7%-13.0%

Return vs Industry: CAT exceeded the US Machinery industry which returned -12.9% over the past year.

Return vs Market: CAT exceeded the US Market which returned -12.9% over the past year.

Price Volatility

Is CAT's price volatile compared to industry and market?
CAT volatility
CAT Average Weekly Movement5.4%
Machinery Industry Average Movement6.0%
Market Average Movement7.9%
10% most volatile stocks in US Market17.1%
10% least volatile stocks in US Market3.2%

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

FoundedEmployeesCEOWebsite
1925107,700Jim Umplebyhttps://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

How do Caterpillar's earnings and revenue compare to its market cap?
CAT fundamental statistics
Market CapUS$98.09b
Earnings (TTM)US$6.76b
Revenue (TTM)US$54.03b

14.5x

P/E Ratio

1.8x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
CAT income statement (TTM)
RevenueUS$54.03b
Cost of RevenueUS$38.16b
Gross ProfitUS$13.51b
Other ExpensesUS$6.76b
EarningsUS$6.76b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)12.80
Gross Margin25.01%
Net Profit Margin12.50%
Debt/Equity Ratio234.5%

How did CAT perform over the long term?

See historical performance and comparison

Dividends

2.6%

Current Dividend Yield

36%

Payout Ratio
We’ve recently updated our valuation analysis.

Valuation

Is CAT undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation 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.

CAT key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue2.4x
Enterprise Value/EBITDA12.3x
PEG Ratio2x

Price to Earnings Ratio vs Peers

How does CAT's PE Ratio compare to its peers?

CAT PE Ratio vs Peers
The above table shows the PE ratio for CAT vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average16x
PCAR PACCAR
14.4x-2.4%US$31.8b
CMI Cummins
15.1x3.8%US$30.9b
WAB Westinghouse Air Brake Technologies
26.6x12.8%US$16.9b
ALSN Allison Transmission Holdings
7.9x-0.007%US$3.6b
CAT Caterpillar
14.5x7.3%US$98.1b

Price-To-Earnings vs Peers: CAT is good value based on its Price-To-Earnings Ratio (14.5x) compared to the peer average (16x).


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 (14.5x) compared to the US Machinery industry average (22.4x)


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.

CAT PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio14.5x
Fair PE Ratio26.4x

Price-To-Earnings vs Fair Ratio: CAT is good value based on its Price-To-Earnings Ratio (14.5x) compared to the estimated Fair Price-To-Earnings Ratio (26.4x).


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 ($185.81) is trading below our estimate of fair value ($231.8)

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

2/6

Future 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 (12.8% 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 (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 (45.8%).


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Past Performance

How has Caterpillar performed over the past 5 years?

Past Performance Score

5/6

Past 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 9.3%.


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

4/6

Financial 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

5/6

Dividend Score 5/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage


2.58%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: CAT's dividend (2.58%) is higher than the bottom 25% of dividend payers in the US market (1.52%).

High Dividend: CAT's dividend (2.58%) is low compared to the top 25% of dividend payers in the US market (4.1%).


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 ($USD24.30M) is above average for companies of similar size in the US market ($USD12.96M).

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: CAT insiders have only sold shares 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$98.091b
  • 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

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/08/08 00:00
End of Day Share Price2022/08/08 00:00
Earnings2022/06/30
Annual Earnings2021/12/31


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.