Caterpillar’s (NYSE:CAT) distinctive yellow machines are in service in nearly every country in the world. The company generated approximately 62% of its revenues from foreign markets in 2007. In addition, 71% of CAT’s independent dealers are located outside of the
CAT operates the following business units:
Market And Economic Trends
Looking outside the domestic market, burgeoning growth of markets like
- CAT is the largest producer of earthmoving equipment with approximately 40% market share; the largest competitor to CAT is Japanese company Komatsu with 21% market share
- CAT’s highly diversified position in foreign markets sets itself up for success. I expect the company to continue to make consistent revenue gains in 2009 due to strong infrastructure need for construction, energy development and mining.
- Financial metrics have grown or remained flat: Revenue increased by 8.3% in 2007 versus 2006, operating profits increased by 3%, net income remained flat, cash flow grew by 4% and EPS grew by 4%.
- CAT is relatively undervalued as it’s trading at 14.6 P/E, well below the high 10’s and mid 20’s seen in the early half of the millennium. In addition, other companies in the heavy equipment sector are currently trading well above CAT’s ratio, with the industry average trading around $17.7.
- CAT has a gigantic independent dealer network that sells and markets CAT products to every market around the world. The deal network actually employs more people and has more assets than CAT itself. I believe this is a competitive advantage for CAT as it allows CAT to scale operations relatively quickly with little impact to the bottom line.
- CAT recently beat Q1 analyst EPS estimate of $1.33 per share by coming out with $1.45 per share.