On Mar 7, 2014, we issued an updated research report on
). The mining equipment behemoth reported a 5% increase in its
fourth-quarter 2013 earnings to $1.54 per share - the only
quarter in fiscal 2013 to report year-over-year (y-o-y) growth.
The company's incessant efforts to cut down costs helped mitigate
the effect of lower mining-related sales on its profits.
Caterpillar expects revenues in 2014 to be flat with 2013 or move
up or down in a 5% range and earnings per share at $5.85,
reflecting 2% annual growth. Construction Industries and Power
Systems revenues are expected to deliver sales growth, driven by
better economic development. Caterpillar will also benefit from
the recovery in the construction sector and macroeconomic
stabilization in Europe. Management also expects a number of
smaller acquisitions in 2014, focused on its Energy &
Caterpillar will purchase approximately $1.7 billion of its
common stock under an accelerated stock repurchase transaction in
the first quarter of 2014, completing its $7.5 billion repurchase
authorization. In addition, the company's board of directors
approved a new $10 billion stock repurchase program that will
expire on Dec 31, 2018. Share repurchases will be accretive to
earnings in 2014 and provide support to the stock.
Caterpillar's share in the Chinese Excavator market has increased
to 12%. The Chinese excavator market is expected to grow and
Caterpillar can capitalize on the demand, given its expanding
Caterpillar has initiated extensive cost-saving programs across
its global businesses. The company will continue to benefit from
its additional restructuring actions in 2014 to optimize its cost
structure and improve its operational effiency. Even though
extensive restructuring actions have long-term benefits, they
will impact profitability in 2014.
At the end of 2013, Caterpillar's backlog was $18 billion, down
$1.1 billion sequentially and $2.2 billion year over year. The
annual decline was due to reduction in order backlog for
mining-related products in Resource Industries and a slight
decline in Power Systems, which offset a substantial increase in
Construction Industries. Order rates will have to pick up from
current levels to meet the company's guidance. Sales in Resource
Industries will continue to be affected as mining companies keep
reducing their capital expenditures in 2014.
Caterpillar currently carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked stocks that are worth considering in this
H&E Equipment Services Inc.
The Manitowoc Co., Inc.
). While H&E Equipment Services sports a Zacks Rank #1
(Strong Buy), Manitowoc and Komatsu carry a Zacks Rank #2
CATERPILLAR INC (CAT): Free Stock Analysis
H&E EQUIP SVCS (HEES): Free Stock Analysis
KOMATSU LTD ADR (KMTUY): Get Free Report
MANITOWOC INC (MTW): Free Stock Analysis
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