) has partnered with
Westport Innovations Inc.
), a global leader in natural gas engines, to co-develop natural
gas technology for off-road equipment, including mining trucks and
The two parties will combine technologies and know-how,
including Westport High Pressure Direct Injection (HPDI) technology
and Caterpillar's industry leading off-road engine and machine
The development program will be funded by Caterpillar and will
start immediately for both new and existing engines, combustion
technology and fuel systems. Commercial production is expected to
begin in five years. Once the products hit the market, Westport
will participate in the supply of key components.
In comparison to diesel, which is currently used in the majority
of Caterpillar's engines, natural gas is a lower cost alternative.
The engines running on natural gas will provide operational
efficiencies comparable to the diesel engines. Furthermore,
reduced carbon emissions add to environmental benefits and will
help meet regulatory emissions standards of the US Environmental
Protection Agency (EPA).
The liaison will initially focus on engines used in mining
trucks and locomotives. The companies will gradually develop
natural gas technology for Caterpillar's off-road engines, which
are used in a variety of electric power, industrial, machine,
marine and petroleum applications worldwide.
This innovative stride will mark Caterpillar as the first
manufacturer to bring HPDI technology to the high horsepower
off-road market with an offering of the broadest product line of
natural gas-fueled machines and equipment. The low cost and no
compromise on the operational front lend a definite competitive
advantage. Furthermore, upgrading its older diesel-powered
engines in several applications to natural gas-powered engines will
be accretive to revenues.
Caterpillar's order backlog has steadily increased throughout
the quarter and is at a new high, which holds promise for the year
ahead. Many products have long lead times, with some slated for
2014. This bodes well for Caterpillar's future performance.
The company is persistently adding production capacity for many
of its mining products. We believe that the top line at the company
will continue to grow on the back of increasing demand for
construction and mining equipment. Caterpillar plans to open new
facilities and expand existing operations, particularly in the
emerging markets, which will boost its long-term potential.
On the flip side, besides the European debt crisis, signs of a
slowdown in China have triggered concerns. A slowing Chinese
economy will have a negative effect on the infrastructure and
construction spending with an immediate impact on Caterpillar's
sales in the near term.
We maintain our Neutral recommendation on Caterpillar due
to the recent loss of momentum in sales growth, margin headwinds,
negative impact of the European debt crisis and a slowing Chinese
economy. The quantitative Zacks #3 Rank (short term Hold rating)
for the company indicates no clear directional pressure on the
stock over the near term.
Peoria, Illinois-based Caterpillar Inc. is the manufacturer of
construction and mining equipment, diesel and natural gas engines,
and industrial gas turbines. The company is one of the few leading
U.S. companies in an industry that competes globally from a
principally domestic manufacturing base.
Caterpillar operates two divisions: Machinery and Power Systems
(M&PS) and Financial Products. Caterpillar competes with the
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