Skip to Content

Caterpillar Inc CAT

Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
Is it the right time to buy or sell?
Find out with Morningstar Premium
Is it the right time to buy or sell?
Find out with Morningstar Premium

1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Stewardship

PREMIUM

Cautious Dealers Pare Inventories, but No Major Surprises in Caterpillar’s 2Q; Maintaining FVE

Scott Pope, CFA Equity Analyst

Analyst Note

| Scott Pope, CFA |

As the pandemic impeded commerce across the globe and spooked dealers, Caterpillar’s revenue declined 31% in the second quarter to $10 billion. Caterpillar’s independent dealer base reduced inventories by $1.4 billion in the quarter compared with a $500 million increase in the second quarter of 2019. This $1.9 billion change was a major factor in the $4.4 billion year-over-year sales decline. Caterpillar’s retail sales decline was a less severe 23% with Asia-Pacific the sole geography that grew at the retail level (+7%). Despite significant rationalization of its manufacturing footprint in the past decade, Caterpillar has significant fixed costs. We were modestly impressed that operating margin was 7.8% in the quarter, which was a major improvement over the 1.9% it experienced in 2009 during the financial crisis. Adjusted EPS plummeted to $1.03 from $2.83 in second-quarter 2019. Our fair value estimate of $148 remains unchanged.

Read Full Analysis

Company Profile

Business Description

Caterpillar is an iconic manufacturer of heavy equipment, power solutions, and locomotives. It is currently the world’s largest manufacturer of heavy equipment with approximately 13% of global market share in 2018. The company is divided into four reportable segments: construction industries, resource industries, energy & transportation, and Caterpillar Financial Services. Its products are available through a dealer network that covers the globe with 2,163 branches maintained by 168 dealers. Caterpillar Financial Services provides financing to its customers and dealers, generating approximately 9% of operating profit.

Contact
510 Lake Cook Road, Suite 100
Deerfield, IL, 60015
T +1 224 551-4000
Sector Industrials
Industry Farm & Heavy Construction Machinery
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 102,300

Related