Caterpillar Inc. (CAT): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
We have maintained our Outperform recommendation on Caterpillar with a target price of $130. Caterpillar's second-quarter earnings per share increased 17% to $1.69, as the company's incessant efforts to reduce costs largely mitigated the effect of lower mining-related sales on its profits. Caterpillar trimmed its 2014 revenue guidance to a range of $54 billion to $56 billion but raised its earnings per share guidance to $6.20. Caterpillar will benefit from the recovery in the U.S. construction sector and the macroeconomic stabilization in Europe, both helping to offset the impact of a weak mining sector. Furthermore, the share repurchases will provide support to the stock.

Overview:

Caterpillar Inc. (CAT) is a leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. It is also a leading exporter in the U.S. with more than half of its sales being generated outside the United States. Through its global network of independent dealers, Caterpillar builds long-term relationships with customers around the world. Caterpillar operates through two divisions Machinery & Power systems and Financial Products.

Machinery, Energy & Transportation (Approximately 95% of total revenue in the second quarter of 2014) This segment represents the aggregate of Construction Industries, Resource Industries, Power Systems and All Other Segments and related corporate items and eliminations.

Construction Industries This segment is responsible for small and core construction machines. Its product portfolio includes backhoe loaders, small wheel loaders, small and medium track-type tractors, skid steer loaders, multi-terrain loaders, mini excavators, compact wheel loaders, select work tools, small, medium and large track excavators, wheel excavators, medium wheel loaders, track-type loaders, motor graders and pipe layers. In addition, the Construction Industries segment is responsible for the Power Systems and components in Japan and an integrated manufacturing cost center that supports the Machinery and Power Systems businesses.

Resource Industries This segment takes care of the business strategies, product design, product management and development, manufacturing, marketing and sales along with product support for large track-type tractors, hard rock vehicles, longwall and highwall miners, electric rope shovels, draglines, hydraulic shovels, drills, large wheel loaders, large mining, off-highway and articulated trucks, wheel tractor scrapers, wheel dozers, select work tools, machinery components and electronics and control systems.

Energy & Transportation This segment, formerly known as Power Systems, supports customers by providing them reciprocating engines, turbines, diesel-electric locomotives and related parts across industries, catering to power generation, industrial, oil and gas and transportation applications. It also manages marine and rail-related businesses.

All Other Segments These segments primarily include activities such as the re-manufacturing of CAT engines and components and re-manufacturing services for other companies as well as product management, development, manufacturing, marketing and product support of undercarriages, specialty products, hardened bar stock components and ground engaging tools, paving products, forestry products, industrial and waste products and tunnel-boring equipment.

Financial Products Segment (Approximately 5% of total revenue in the second quarter of 2014) This segment provides financing to customers and dealers for the purchase and lease of Caterpillar and other equipment. It also offers financing for Caterpillar sales to dealers. Its financing plans include operating and finance leases, installment sale contracts, working capital loans and wholesale financing plans. This division also provides various forms of insurance to customers and dealers to facilitate the purchase and lease of equipment.


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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 , Stocks

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