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Category: Caterpillar and Stock Market
Last updated: 4 July 2020 Stock price: $127.72 We take a look at Caterpillar (CAT) enterprise strategy and sustainability report. Caterpillar is a leading manufacturer of construction and mining equipment and its revenues topped $58 billion in its 2019 fiscal year.
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- Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines "
About Caterpillar
With 2019 sales and revenues of $53.800 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel electric locomotives. The company principally operates through its three primary segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment. Caterpillar is also a leading U.S. exporter. Through a global network of independent dealers and direct sales of certain products, Caterpillar builds long-term relationships with customers around the world
Quick facts about Caterpillar
- Caterpillar is listed on the New York Stock Exchange (NYSE) under share code ticker: CAT
- Shareholders of record at the end of 2019 totaled 25,985, compared with 26,938 at the end of 2018.
- Sales and revenue in 2019 fiscal year: $53.8 billion
- Sales percentage inside of the USA: 42%
- Sales percentage outside of the USA: 58%
- Earnings per share in fiscal 2019: $10.74
- Dividend declare in 2019: $3.95
- Total assets: $78.453 billion
- Average number of employees: 103 400
Main international markets for Caterpillar
The summary below shows the total finance receivables of the different operating regions of Caterpillar (in Dollar millions)
Region:
Region:
- North America: $ 8,188
- Europe, Africa and Middle East (EAME): $3,157
- Asia Pacific: $2,523
- Latin America: $1,280
The industries Caterpillar operates in
A generator set powered by methane from landfills. A dual-fuel engine that can burn natural gas, resulting in lower emissions. An autonomous technology solution that substantially improves efficiency, productivity and safety. These are just a few of the many ways that Caterpillar’s vast range of products and solutions helps our customers build a better world. As our business grows, our potential for positive impact grows — driven by the successful execution of our enterprise strategy which we introduced in 2017. We have already achieved meaningful progress in financial results and in our ability to support the work of our customers around the world.
Our Strategy Supports Sustainability
Our strategy contains three elements: operational excellence, expanded offerings and services, and is underpinned by Caterpillar’s Values in Action. Those Values, including Sustainability, are guidelines for the way we act with each other, our suppliers, and our customers every day.
Positive business outcomes are closely aligned with positive social and environmental impacts. For example, the first element of our strategy, operational excellence, translates into initiatives that improve safety, deliver high-quality products and implement Lean operating principles. The most important result is continuing to have Caterpillar employees return home safe to their families, and in 2019, we saw our best safety performance on record. Operational excellence also offers important environmental sustainability benefits, particularly decreasing the volume of resources needed to manufacture our products.
Expanded offerings, the second element of our strategy, means having the right products and solutions to make our customers more successful. These offerings include products that provide sustainability benefits, including lower emissions profiles and reduced operating costs. We introduced the world’s first high drive Electric Drive dozer this year, the Cat® D6 XE. It offers up to 35% better fuel efficiency compared to previous models, increasing productivity and helping our customers succeed in a more sustainable way.
The services element of our strategy encompasses the many ways Caterpillar helps our customers succeed after they buy a piece of equipment. These include increasingly advanced digital capabilities, such as fleet analytics that help customers complete their jobs more efficiently, as well as remanufacturing and rebuild offerings that extend the life of equipment, reducing operating costs and keeping resources in circulation.
Driving Toward a Sustainable Future
As we continue to execute our enterprise strategy for profitable growth, we are also executing our 2020 sustainability goals. These include goals related to safety, energy and emissions, water, waste, building efficiency, circular economy, jobsite efficiency and sustainability of our products, services and solutions. We are proud to have already achieved or exceeded several of these goals and are setting our sights on the future. You can read more about our progress to date and efforts underway to establish goals beyond 2020 in the Sustainability at Caterpillar section of this report
Working Toward a Better World
Year after year, Caterpillar customers are working to address the demands of a growing global population, an emerging middle class in the developing world, and an increasingly urbanized society. The company supplements that great work with the targeted efforts of the Caterpillar Foundation. Since 1952, the Foundation has donated about $770 million to build resilient communities around the world. We are proud of our Foundation’s ability to contribute to building a better world.
We are pleased to have been named to the Dow Jones Sustainability Indices (DJSI), including both the World and North America indices. Caterpillar was also named to Fortune’s World’s Most Admired Companies List, and we were in the Top 50 of that list for the 19th consecutive year. As I write this letter, COVID-19 has become a global pandemic, presenting new challenges around the world. Governments responded with guidance to manage the crisis and, in many instances, operations such as Caterpillar's are considered essential activity for support of critical infrastructure. Customers use our products to provide primary and stand-by power for hospitals, grocery stores and data centers; transport food and critical supplies in trucks, ships and locomotives; maintain clean water and sewer systems; mine commodities and extract the fuels essential to satisfy global energy demand. Along with our dealers and suppliers, Caterpillar is working to help ensure uninterrupted access to the products and services that our customers rely upon to support society during these difficult times.
While we are serving this important need, Caterpillar remains dedicated to the safety, health and well-being of our employees. We are leveraging our strong safety culture to manage through this pandemic. Employees who can work from home are doing so. In our facilities that remain open, Caterpillar is taking appropriate precautions and implementing safeguards to protect our team members. We have increased the frequency of cleaning and disinfecting facilities with special attention to common areas; we are following social distancing practices and are implementing other measures consistent with specific regulatory requirements and guidance from health authorities.
In addition, the Caterpillar Foundation has committed $10 million to directly support global COVID-19 response activities and help organizations that have been impacted. These investments are an important expression of our company’s values and will provide support for communities around the world. Caterpillar imagines a better world – one that we are striving to achieve through our business. As our customers help meet the infrastructure, energy and resource needs of tomorrow, we are dedicated to helping create a future that offers a better life for all.
Jim Umpleby
Chairman & CEO
Our Strategy Supports Sustainability
Our strategy contains three elements: operational excellence, expanded offerings and services, and is underpinned by Caterpillar’s Values in Action. Those Values, including Sustainability, are guidelines for the way we act with each other, our suppliers, and our customers every day.
Positive business outcomes are closely aligned with positive social and environmental impacts. For example, the first element of our strategy, operational excellence, translates into initiatives that improve safety, deliver high-quality products and implement Lean operating principles. The most important result is continuing to have Caterpillar employees return home safe to their families, and in 2019, we saw our best safety performance on record. Operational excellence also offers important environmental sustainability benefits, particularly decreasing the volume of resources needed to manufacture our products.
Expanded offerings, the second element of our strategy, means having the right products and solutions to make our customers more successful. These offerings include products that provide sustainability benefits, including lower emissions profiles and reduced operating costs. We introduced the world’s first high drive Electric Drive dozer this year, the Cat® D6 XE. It offers up to 35% better fuel efficiency compared to previous models, increasing productivity and helping our customers succeed in a more sustainable way.
The services element of our strategy encompasses the many ways Caterpillar helps our customers succeed after they buy a piece of equipment. These include increasingly advanced digital capabilities, such as fleet analytics that help customers complete their jobs more efficiently, as well as remanufacturing and rebuild offerings that extend the life of equipment, reducing operating costs and keeping resources in circulation.
Driving Toward a Sustainable Future
As we continue to execute our enterprise strategy for profitable growth, we are also executing our 2020 sustainability goals. These include goals related to safety, energy and emissions, water, waste, building efficiency, circular economy, jobsite efficiency and sustainability of our products, services and solutions. We are proud to have already achieved or exceeded several of these goals and are setting our sights on the future. You can read more about our progress to date and efforts underway to establish goals beyond 2020 in the Sustainability at Caterpillar section of this report
Working Toward a Better World
Year after year, Caterpillar customers are working to address the demands of a growing global population, an emerging middle class in the developing world, and an increasingly urbanized society. The company supplements that great work with the targeted efforts of the Caterpillar Foundation. Since 1952, the Foundation has donated about $770 million to build resilient communities around the world. We are proud of our Foundation’s ability to contribute to building a better world.
We are pleased to have been named to the Dow Jones Sustainability Indices (DJSI), including both the World and North America indices. Caterpillar was also named to Fortune’s World’s Most Admired Companies List, and we were in the Top 50 of that list for the 19th consecutive year. As I write this letter, COVID-19 has become a global pandemic, presenting new challenges around the world. Governments responded with guidance to manage the crisis and, in many instances, operations such as Caterpillar's are considered essential activity for support of critical infrastructure. Customers use our products to provide primary and stand-by power for hospitals, grocery stores and data centers; transport food and critical supplies in trucks, ships and locomotives; maintain clean water and sewer systems; mine commodities and extract the fuels essential to satisfy global energy demand. Along with our dealers and suppliers, Caterpillar is working to help ensure uninterrupted access to the products and services that our customers rely upon to support society during these difficult times.
While we are serving this important need, Caterpillar remains dedicated to the safety, health and well-being of our employees. We are leveraging our strong safety culture to manage through this pandemic. Employees who can work from home are doing so. In our facilities that remain open, Caterpillar is taking appropriate precautions and implementing safeguards to protect our team members. We have increased the frequency of cleaning and disinfecting facilities with special attention to common areas; we are following social distancing practices and are implementing other measures consistent with specific regulatory requirements and guidance from health authorities.
In addition, the Caterpillar Foundation has committed $10 million to directly support global COVID-19 response activities and help organizations that have been impacted. These investments are an important expression of our company’s values and will provide support for communities around the world. Caterpillar imagines a better world – one that we are striving to achieve through our business. As our customers help meet the infrastructure, energy and resource needs of tomorrow, we are dedicated to helping create a future that offers a better life for all.
Jim Umpleby
Chairman & CEO
Competition of Caterpillar
Caterpillar products and product support services are sold worldwide into a variety of highly competitive markets. In all markets, we compete on the basis of product performance, customer service, quality and price. From time to time, the intensity of competition results in price discounting in a particular industry or region. Such price discounting puts pressure on margins and can negatively impact operating profit. Outside the United States, certain competitors enjoy competitive advantages inherent to operating in their home countries or regions.
The competitive environment for construction machinery is characterized by some global competitors and many regional and specialized local competitors. Examples of global competitors include CASE (part of CNH Industrial N.V.), Deere Construction & Forestry (part of Deere & Company), Doosan Infracore Co., Ltd., Hitachi Construction Machinery Co., Ltd., Hyundai Construction Equipment Co., Ltd., J.C. Bamford Excavators Ltd., Kobelco Construction Machinery (part of Kobe Steel, Ltd), Komatsu Ltd., Kubota Farm & Industrial Machinery (part of Kubota Corporation), and Volvo Construction Equipment (part of the Volvo Group). As an example of regional and local competitors, our competitors in China also include Guangxi LiuGong Machinery Co., Ltd., Longking Holdings Ltd., Sany Heavy Industry Co., Ltd., XCMG Group, Shandong Lingong Construction Machinery Co., Ltd. (SDLG, part of the Volvo Group) and Shantui Construction Machinery Co., Ltd., (part of Shandong Heavy Industry Group Co.). Each of these companies has varying product lines that compete with Caterpillar products, and each has varying degrees of regional focus.
The competitive environment for construction machinery is characterized by some global competitors and many regional and specialized local competitors. Examples of global competitors include CASE (part of CNH Industrial N.V.), Deere Construction & Forestry (part of Deere & Company), Doosan Infracore Co., Ltd., Hitachi Construction Machinery Co., Ltd., Hyundai Construction Equipment Co., Ltd., J.C. Bamford Excavators Ltd., Kobelco Construction Machinery (part of Kobe Steel, Ltd), Komatsu Ltd., Kubota Farm & Industrial Machinery (part of Kubota Corporation), and Volvo Construction Equipment (part of the Volvo Group). As an example of regional and local competitors, our competitors in China also include Guangxi LiuGong Machinery Co., Ltd., Longking Holdings Ltd., Sany Heavy Industry Co., Ltd., XCMG Group, Shandong Lingong Construction Machinery Co., Ltd. (SDLG, part of the Volvo Group) and Shantui Construction Machinery Co., Ltd., (part of Shandong Heavy Industry Group Co.). Each of these companies has varying product lines that compete with Caterpillar products, and each has varying degrees of regional focus.
Employees of Caterpillar
As of December 31, 2019, we employed about 102,300 full-time persons of whom approximately 58,700 were located outside the United States. In the United States, we employed approximately 43,600 employees, most of whom are at-will employees and, therefore, not subject to any type of employment contract or agreement. At select business units, certain highly specialized employees have been hired under employment contracts that specify a term of employment, pay and other benefit
Caterpillar (NYSE: CAT) stock performance
The graph below shows the cumulative shareholder return assuming an investment of $100 on December 31, 2014, and reinvestment of dividends issued thereafter.
A $100 invested at the end of December 2014 would have resulted in an investment worth around $187.74 as at the end of December 2019. That is an annual growth rate of 13.55% over the last 5 years, which is pretty strong returns provided to stockholders, this while the S&P 500 provided an average annual return of 11.7%. So the stock of Caterpillar has grown at 1.15 times that of the S&P 500 over the last 5 years.
Our latest Caterpillar stock valuation (29 April 2020)
So what is Caterpillar's stock worth based on the release of their 1st quarter 2020 earnings report? Based on Caterpillar's 1st quarter 2020 earnings report our valuation model provides a target price (full value price) at $126.70 a Caterpillar stock. We therefore believe that the stock of Caterpillar is slightly overvalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $126.70. Therefore we see a good entry point into Caterpillar stock at $114 or below. We expect the stock of Caterpillar to pull back slightly from its current price to levels closer to our target price in coming weeks and months.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $126.70. Therefore we see a good entry point into Caterpillar stock at $114 or below. We expect the stock of Caterpillar to pull back slightly from its current price to levels closer to our target price in coming weeks and months.