Caterpillar Expands Sumter Plant - Analyst Blog

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Caterpillar Inc. ( CAT ) is planning to expand its manufacturing facility in Sumter, South Carolina for a total investment of $20 million. On expansion, the plant will be the primary source for small and large hydraulic cylinders that are used in Caterpillar products in North and South America.  

The Sumter facility is currently engaged in the production of small hydraulic cylinders. Once the expansion is completed, production of larger hydraulic cylinders will be shifted from Caterpillar's Joliet Illinois facility to the Sumter facility. The Joliet facility will then focus on other components that are being currently produced there.

The expansion is slated to be completed by the fourth quarter of 2012. The expansion will add 170,000 square feet, tripling the Sumter facility's total footprint to approximately 275,000 square feet. Post expansion, Caterpillar will add more than 80 jobs over a two-year period.

The company is doggedly adding production capacity for many of its products. Caterpillar's recent string of investments includes expansion in Tosno, Russia for off-highway trucks, new mining truck facility in Indonesia and expansion of existing facility, capacity expansion of mining trucks produced in Illinois, expansion of mining truck capacity and a new small engine facility in India, and a new small excavator and tractor facility in Georgia. A new parts distribution center in California and expansion of an R&D center in Wuxi, China are also in the pipeline.

We believe the top line at the company will continue to grow on the back of torrid demand for construction and mining equipment. Caterpillar's expansion plans of opening new facilities and furthering existing operations, particularly in the emerging markets, will boost its long-term potential.

Furthermore, its biggest acquisition to date, Bucyrus, will not only enhance its product line and increase its presence in the emerging markets, but also strengthen its position as the top mining equipment manufacturer in the U.S. Accordingly, the company currently retains a Zacks #2 Rank on the stock, equivalent to a short-term rating of Buy.

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 likes of  CNH Global NV  ( CNH ),  Komatsu Ltd.  ( KMTUY ) and  Volvo AB  ( VOLVY ).


 
CATERPILLAR INC ( CAT ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CAT , CNH , VOLVY

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