Caterpillar (NYSE: CAT) - american corporation, which designs, develops and sells special equipment. The company is known worldwide as a leading manufacturer of construction and mining equipment., contains 20 various brands.
About company
Caterpillar divides the business into four main segments:
- Construction machinery.
- Machines for the mining industry.
- Equipment for the energy and transport industry.
- Financial products.
Construction machinery. Production of equipment for the needs of construction, infrastructural, forestry and other industries. Consumer inquiries for each region in this segment are different. For example, cost is important in developing countries, and in developed - performance, because it leads to more savings. For this reason, the composition of subsidiaries at Caterpillar is so diverse.. Main products in this segment:
- excavators;
- backhoe loaders;
- medium and small tractors;
- motor graders;
- compact track and wheel loaders;
- ultra small wheel loaders;
- UTV machines;
- products of the Chinese subsidiary SEM.
Equipment for the energy and transport industry. Second revenue segment, which produces equipment for oil and gas, energy, nautical, railway and industrial sectors.
Besides, the company is partnering with the US Department of Energy to develop hydrogen-fuelled systems. Main products in this segment:
- piston engines;
- generator sets;
- gas turbines;
- engine and component remanufacturing services;
- diesel-electric locomotives and their components;
- other goods and services, related to rail transport.
Machines for the mining industry. Production of equipment for open and underground mining, as well as supply of spare parts: transmissions, hydraulic systems, electronics - and software. The company's equipment is used for the extraction and transportation of copper, iron ore, coal, oil sands, gold and other minerals.
Financial products. Through a subsidiary of Cat Financial, the company provides a variety of services to customers and dealers.: from buying or renting Caterpillar equipment on credit, installment or other type of loan before insurance and maintenance.
Caterpillar sales geography, billion dollars
| North America | Europe, Africa and Middle East | Asia and the Pacific | Latin America | Overall result | |
|---|---|---|---|---|---|
| Construction machinery | 2,417 | 1,240 | 1,076 | 0,529 | 5,255 |
| Equipment for the energy and transport industries | 1,924 | 1,144 | 0,744 | 0,329 | 5,077 |
| Machines for the mining industry | 0,674 | 0,456 | 0,744 | 0,417 | 2,406 |
| Financial products | 0,478 | 0,105 | 0,111 | 0,068 | 0,762 |
Current results
Caterpillar is a financially stable company, which is growing well against the backdrop of market benchmarks. In 2020, the company faced difficulties due to low demand due to the coronavirus pandemic., but in 2021 the situation has changed dramatically. The company restores production and financial performance, and for 9 have already earned more months, than all last year.
Management provided a small announcement of forecasts for the end of the year:
- IN 4 quarter, the company expects strong demand in all regions: in the US, thanks to the President's Infrastructure Investment Act, in the Asia-Pacific region - due to a favorable commodity market, in Europe, Africa and the Middle East thanks to government stimulus measures, and in Latin America due to recovery in mining.
- Seasonality and high demand in three main segments: construction equipment, mining machinery and equipment for the energy and transportation industries - will lead to higher sales in the fourth quarter compared to the third.
- IN 4 lower adjusted operating income due to seasonality and supply chain problems.
- Caterpillar capital expenditures in 2021 will be from 1 up to $ 1.1 billion, and the effective tax rate is 26%.
Financial results of the company at the end of the period, billion dollars
| Revenue | EBITDA | Net profit | net debt | |
|---|---|---|---|---|
| 2016 | 38,537 | 4,785 | −0,067 | 29,615 |
| 2017 | 45,462 | 7,353 | 0,754 | 26,617 |
| 2018 | 54,722 | 11,083 | 6,147 | 28,696 |
| 2019 | 53,800 | 10,895 | 6,093 | 29,373 |
| 2020 | 41,478 | 6,999 | 2,998 | 27,811 |
| 9м2021 | 37,173 | 7,033 | 4,369 | 27,338 |
Comparison with competitors
| EV / EBITDA | P / E | net debt / EBITDA | |
|---|---|---|---|
| Caterpillar | 14,99 | 20,98 | 3,03 |
| Deere & Company | 15,25 | 18,68 | 3,71 |
| AGCO | 14,67 | 19,46 | 1,61 |
| Oshkosh | 10,75 | 15,93 | −0,86 |
| Terex | 10,19 | 17,51 | 1,00 |
Dividends
Caterpillar more 27 years in a row has been increasing its dividend payments, which currently bring shareholders an annual return of 2,2%. Over the past period, the company has paid 1,11 $ per share as dividend. The next payment to investors should be expected next year., before the publication of financial results for 4 neighborhood.
In addition to paying dividends, the company also conducts and buyback of shares. For 9 months of 2021 Caterpillar redeemed from the securities market in the amount of $ 1.6 billion, while the ransom in 3 quarter significantly accelerated and amounted to $ 1.4 billion against $ 0.2 billion in 2 quarter.
Arguments for
Biden's infrastructure plan. The President of the United States plans to invest about 1.2 trillion dollars in American infrastructure, of which 165 billion dollars will be spent on the construction of roads and bridges, as well as for the modernization of railways. As a result, Caterpillar, as the largest manufacturer of construction equipment, in the near future will face increased demand for products.
Dividend aristocrat. The company is already over 27 has been continuously paying and increasing payments to shareholders for years.
Even more dividends. The company plans to increase payments to 100% free cash flow, which for 9 months of this year is equal to $ 4.2 billion. The company spent $3.4 billion on dividends and buybacks in three quarters of 2021.
Investment in hydrogen. Caterpillar takes its first steps towards sustainable fuels. To speed up the process, the company entered into two agreements for cooperation in the field of hydrogen research with Microsoft and Chevron., but that's not all. From the end of 2021, the company will start selling its first hydrogen generator set.
Arguments against
Problems with logistics. Caterpillar, like many other industries, faced problems in the supply chain. In 2021, this led to a decrease in profits, because of which the management had to raise prices for products twice, to compensate for the increase in cost. Management does not rule out further price increases in all areas, since the situation has not changed much.
Debt load. Caterpillar is heavily indebted, which does not allow paying its shareholders 100% free cash flow. Net debt of the enterprise for 30 September 2021 is $ 27.338 billion, a "net debt" / EBITDA "for the same period is 3,03.
The new strain spoils everything. At the end of November, a new strain of coronavirus, omicron, was discovered in Africa.. The virus has already been detected in almost all major countries, including USA. If everything goes according to a negative scenario, vaccines will not cope, and the governments of the countries will introduce lockdowns, — Caterpillar will record a drop in financial results due to low demand.
What's the bottom line?
Caterpillar is America's leading construction equipment manufacturer., which pays its shareholders more than 80% free cash flow. The company may be of interest to medium-term investors, because America's infrastructure transformation over the next few years will help the company strengthen its position in the market.
