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Caterpillar Sits on Record Backlog - Analyst Blog
Caterpillar Inc. ( CAT ) revealed at the ISI Annual Industrial Conference that the company's backlog is at the highest level ever. Moreover, many products have long lead times, with some slated for 2014. This bodes well for Caterpillar's future performance.
Caterpillar's backlog has improved steadily throughout fiscal 2011 and attained record levels at fiscal 2011 end. At its earnings call, the company had reported an order backlog of $29.8 billion at the end of fiscal 2011.
The backlog had increased 59% from $18.7 billion at 2010 end 4% above the third-quarter end. Excluding synergies from Bucyrus, backlog at fiscal 2011 end was $25.7 billion, up 37% year over year and 5% sequentially.
The company also maintained its stand on its outlook for fiscal 2012. Revenues are envisioned in a range of $68.0 billion to $72.0 billion and earnings per share are expected to be around $9.25. Capital expenditures for 2012 are expected to be about $4.0 billion, with about half to be spent in the U.S.
World economy growth is projected at 3.3% in 2012, a marginal improvement from 2.8% in 2011. Mining is expected to remain strong and the company exited 2011 with a sizeable order backlog for mining equipment.
However, construction spending in U.S. and Europe - its two largest markets - is expected to remain lackluster. Replacement demand is expected to be a catalyst for machines in North America and Europe.
The company is doggedly adding production capacity for many of its mining products. Caterpillar's recent string of investments include 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, Chinais 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 ).
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