Caterpillar's fourth-quarter earnings per share declined 20% to
$1.35 due to a muted mining environment, and lower prices of oil
and key mined commodities, particularly copper, coal and iron ore.
At the end of the quarter, Caterpillar's backlog was $17.3 billion,
down from $19.7 billion at the end of the third quarter. For 2015,
the company expects revenues to be around $50 billion and earnings
per share in the range of $4.75. Even though Caterpillar will
benefit from recovery in the U.S. construction sector, cost
reduction efforts, further share repurchases uncertainty around oil
and gas and weakness in the mining industry remain headwinds. We
maintain our neutral recommendation on Caterpillar with a target
price of $84.
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 94% of
total revenue in the third quarter of 2014) This segment represents
the aggregate of Construction Industries, Resource Industries,
Power Systems and All Other Segments and related corporate items
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
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
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
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
Financial Products Segment (Approximately 6% of total revenue in
the third 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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