Caterpillar Positioned to Grow On Global Dealer Reach

Thursday, 24 May 2012 01:26 AM

By Greg Brown

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Caterpillar (CAT) is sitting pretty after a successful move into the mining equipment business via acquisition. Despite the global slowdown, the company is holding on to a large backlog of business and is positioned to grow abroad thanks to the global reach of its dealers.

Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. Sales and revenues reached $60.138 billion in 2011.

The dollar amount of backlog believed to be firm was approximately $29.8 billion, $18.7 billion and $9.6 billion at Dec. 31, 2011, 2010 and 2009, respectively, CAT management said in a recent filing.

Of the total backlog, approximately $4 billion, $2.8 billion and $2.5 billion at Dec. 31, 2011, 2010 and 2009, respectively, was not expected to be filled in the following year. In 2011, order backlog increased by approximately $4.1 billion due to the acquisition of mining equipment maker Bucyrus.

The remaining increase for 2011 compared to 2010 and 2009 year end is primarily due to an increase in volume across most business units, the company said.

The company also is a leading services provider through Caterpillar Financial Services Corporation (Cat Financial), Caterpillar Remanufacturing Services, Caterpillar Logistics Inc. (Cat Logistics) and Progress Rail Services Corporation (Progress Rail).

Caterpillar is 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. Cat machines are distributed principally through a worldwide organization of dealers, 50 located in the United States and 141 located outside the United States, serving 182 countries and operating 3,504 places of business, including dealer rental outlets.

Caterpillar has a market cap of $59.7 billion in a sector, machinery, where the average company size is $6.52 billion. Its trailing 12-month P/E ratio is 11.55 and its five-year projected price-to-earnings-growth (PEG) ratio is 0.66, compared to 1.28 for the sector.

Its projected earnings per share growth for the coming year is 17.88 percent, compared to a sector average of 16.39 percent.

Backlog


Wall Street is very bullish on Caterpillar, with buy or outperform ratings from Raymond James, William Blair & Co., Morgan Stanley, Standard & Poor’s, Longbow, Merrill Lynch, JP Morgan, Goldman Sachs, and Jefferies.

“Caterpillar is sitting on a record backlog that assures a promising 2012. Caterpillar plans to open new facilities and expand existing operations, particularly in the emerging markets, which will boost its long-term potential,” noted the analysts at Zacks Investment Research, while offering a neutral rating.

“Furthermore, the Bucyrus acquisition has positioned Caterpillar as the leading global mining original equipment manufacturer.”

Caterpillar next reports on July 25.

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