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Category: Caterpillar and Stock Market
Last updated: 28 May 2020 Stock price: $121.92 On this page we will look to provide more details about Caterpillar. One of the best known heavy duty machinery manufacturers in the world with sales over $58 billion in 2019 fiscal year.
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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: $10.74
- Dividend declare: $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
Construction Industries
Our Construction Industries segment is primarily responsible for supporting customers using machinery in infrastructure, forestry and building construction. The majority of machine sales in this segment are made in the heavy and general construction, rental, quarry and aggregates markets and mining. The nature of customer demand for construction machinery varies around the world. Customers in developing economies often prioritize purchase price in making their investment decisions, while customers in developed economies generally weigh productivity and other performance criteria that contribute to lower owning and operating costs over the lifetime of the machine. To meet customer expectations in developing economies, Caterpillar developed differentiated product offerings that target customers in those markets, including our SEM brand machines. We believe that these customer-driven product innovations enable us to compete more effectively in developing economies. The majority of Construction Industries’ research and development spending in 2019 focused on the next generation of construction machine
Resource Industries
The Resource Industries segment is primarily responsible for supporting customers using machinery in mining, heavy construction, quarry and aggregates, waste and material handling applications. Caterpillar offers a broad product range and services to deliver comprehensive solutions for our mining customers. We manufacture high productivity equipment for both surface and underground mining operations around the world. Our equipment is used to extract and haul copper, iron ore, coal, oil sands, aggregates, gold and other minerals and ores. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management systems, equipment management analytics and autonomous machine capabilities
Energy & Transportation
Our Energy & Transportation segment supports customers in oil and gas, power generation, marine, rail and industrial applications, including Cat® machines. The product and services portfolio includes reciprocating engines, generator sets, marine propulsion systems, gas turbines and turbine-related services, the remanufacturing of Caterpillar engines and components and remanufacturing services for other companies, diesel-electric locomotives and other railrelated products and services and product support of on-highway vocational trucks for North America. Regulatory emissions standards require us to continue to make investments as new products and new regulations are introduced. On-going compliance with these regulations remains a focus. Emissions compliance in developing markets is complex due to rapidly evolving and unique requirements where enforcement processes can often vary. We employ robust product development and manufacturing processes to help us comply with these regulations.
Financial Products Segment
The business of our Financial Products Segment is primarily conducted by Cat Financial, Insurance Services and their respective subsidiaries. Cat Financial is a wholly owned finance subsidiary of Caterpillar Inc. and its primary business is to provide retail and wholesale financing alternatives for Caterpillar products to customers and dealers around the world. Retail financing is primarily comprised of the financing of Caterpillar equipment, machinery and engines. Cat Financial also provides financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. In addition to retail financing, Cat Financial provides wholesale financing to Caterpillar dealers and purchases short-term trade receivables from Caterpillar. The various financing plans offered by Cat Financial are primarily designed to increase the opportunity for sales of Caterpillar products and generate financing income for Cat Financial. A significant portion of Cat Financial’s activity is conducted in North America, with additional offices and subsidiaries in Latin America, Asia/Pacific, Europe, Africa and the Middle East.
Our Construction Industries segment is primarily responsible for supporting customers using machinery in infrastructure, forestry and building construction. The majority of machine sales in this segment are made in the heavy and general construction, rental, quarry and aggregates markets and mining. The nature of customer demand for construction machinery varies around the world. Customers in developing economies often prioritize purchase price in making their investment decisions, while customers in developed economies generally weigh productivity and other performance criteria that contribute to lower owning and operating costs over the lifetime of the machine. To meet customer expectations in developing economies, Caterpillar developed differentiated product offerings that target customers in those markets, including our SEM brand machines. We believe that these customer-driven product innovations enable us to compete more effectively in developing economies. The majority of Construction Industries’ research and development spending in 2019 focused on the next generation of construction machine
Resource Industries
The Resource Industries segment is primarily responsible for supporting customers using machinery in mining, heavy construction, quarry and aggregates, waste and material handling applications. Caterpillar offers a broad product range and services to deliver comprehensive solutions for our mining customers. We manufacture high productivity equipment for both surface and underground mining operations around the world. Our equipment is used to extract and haul copper, iron ore, coal, oil sands, aggregates, gold and other minerals and ores. In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management systems, equipment management analytics and autonomous machine capabilities
Energy & Transportation
Our Energy & Transportation segment supports customers in oil and gas, power generation, marine, rail and industrial applications, including Cat® machines. The product and services portfolio includes reciprocating engines, generator sets, marine propulsion systems, gas turbines and turbine-related services, the remanufacturing of Caterpillar engines and components and remanufacturing services for other companies, diesel-electric locomotives and other railrelated products and services and product support of on-highway vocational trucks for North America. Regulatory emissions standards require us to continue to make investments as new products and new regulations are introduced. On-going compliance with these regulations remains a focus. Emissions compliance in developing markets is complex due to rapidly evolving and unique requirements where enforcement processes can often vary. We employ robust product development and manufacturing processes to help us comply with these regulations.
Financial Products Segment
The business of our Financial Products Segment is primarily conducted by Cat Financial, Insurance Services and their respective subsidiaries. Cat Financial is a wholly owned finance subsidiary of Caterpillar Inc. and its primary business is to provide retail and wholesale financing alternatives for Caterpillar products to customers and dealers around the world. Retail financing is primarily comprised of the financing of Caterpillar equipment, machinery and engines. Cat Financial also provides financing for vehicles, power generation facilities and marine vessels that, in most cases, incorporate Caterpillar products. In addition to retail financing, Cat Financial provides wholesale financing to Caterpillar dealers and purchases short-term trade receivables from Caterpillar. The various financing plans offered by Cat Financial are primarily designed to increase the opportunity for sales of Caterpillar products and generate financing income for Cat Financial. A significant portion of Cat Financial’s activity is conducted in North America, with additional offices and subsidiaries in Latin America, Asia/Pacific, Europe, Africa and the Middle East.
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.
Patents and trademarks of Caterpillar
We own a number of patents and trademarks, which have been obtained over a period of years and relate to the products we manufacture and the services we provide. These patents and trademarks are generally considered beneficial to our business. We do not regard our business as being dependent upon any single patent or group of patents
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.