Caterpillar vs. Peers: Fundamental Analysis

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We focus today on Industrials, in particular on Heavy Machinery and Vehicles, with two articles: this one on Caterpillar Inc. (NYSE:CAT) and an Earnings Analysis on Deere & Company (NYSE:DE). In July, Caterpillar Inc. (NYSE:CAT) cut its revenue and earnings guidance. Yesterday, rival Joy Global (NYSE:JOY) discussed its earnings for Q3 2013, reporting net sales of $1.3 billion compared to $1.4 billion a year ago. Deere & Company came out with its F3 Q2013 earnings in mid-August and announced quarterly dividends of $.51 a share yesterday.

Caterpillar Logo

Let’s take a closer look at Caterpillar, Inc. one of the largest companies in its peer group. We analyze the company’s growth expectations and capital investment strategy relative to its peers (full peer set at the end of this post).

Get performance characteristics and key ratios for Caterpillar and peers with this full report!

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Share Price Performance

Relative underperformance over the last year and the last month suggest a lagging position.

Caterpillar’s share price performance of -4.1% for the last 12 months is below its peer median. The 30-day trend in its share price performance of 0.5% is also below the peer median implying that the company’s stock performance is lagging its peers. (See report for chart)

Growth Expectations

The market likely has some questions about the company’s long-term strategy.

While Caterpillar’s revenues have grown faster than the peer median (26.6% vs. 16.3% respectively for the past three years), the market gives the stock an about peer median PE ratio of 13.0. This suggests that the market has some questions about the company’s long-term strategy.

Growth Expectations for Caterpillar Inc. (NYSE:CAT)

Capital Investment Strategy

Capital investment may be a little low for a median return business.

Caterpillar’s annualized rate of change in capital of 12.6% over the past three years is less than its peer median of 18.2%. This investment has generated a peer median return on capital of 9.7% averaged over the same three years. The median return on capital investment on a relatively lower investment suggests that the company is under investing.

Caterpillar Inc (NYSE:CAT) Capital Investment Strategy

Peer List for Caterpillar, Inc.

Deere & Company (NYSE:DE), Cummins Inc. (NYSE:CMI), Komatsu Ltd (OTCMKTS:KMTUY), Fiat Industrial SpA (BIT:FIP), CNH Global NV (NYSE:CNH), Sany Heavy Industry Co., LTD (SHA:600031), Zoomlion Heavy Industry Science and Technology Co Ltd (OTCMKTS:ZLIOF), and Joy Global Inc. (NYSE:JOY).

Sector: Producer Manufacturing. Industry Group: Trucks/Construction/Farm Machinery

Are Caterpillar’s returns sustainable? What are its drivers of margin? Answer these and other questions with our Fundamental Analysis.

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