Caterpillar Stock Analysis

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Caterpillar Stock Analysis

  1. 1. Stock Analysis
  2. 2. Team Members Louis-Philippe Edger Gad Elharrar Nicolas Murcia Joseph de la Plante
  3. 3. Presentation Overview <ul><li>COMPANY OVERVIEW </li></ul><ul><li>INDUSTRY PROFILE </li></ul><ul><li>SWOT ANALYSIS </li></ul><ul><li>FINANCIAL ANALYSIS </li></ul><ul><li>RECOMMENDATION </li></ul>
  4. 4. Company Profile <ul><li>Core Business: </li></ul><ul><ul><li>Machinery & Equipment </li></ul></ul><ul><ul><li>Engines </li></ul></ul><ul><ul><li>Financial Products </li></ul></ul><ul><li>After Market Services </li></ul><ul><li>50% of sales overseas </li></ul><ul><li>Market Capitalization: 43B$ </li></ul>
  5. 5. Industry Overview <ul><li>Capital Intensive </li></ul><ul><li>Highly Cyclical </li></ul><ul><li>Recently: Renewed investment in mining and industrial sectors </li></ul><ul><li>Weak Housing Market </li></ul><ul><li>Emissions standards </li></ul>
  6. 6. SWOT Analysis <ul><li>STRENGTHS: </li></ul><ul><ul><ul><li>Good Customer Service; After-sales for the heavy industry </li></ul></ul></ul><ul><ul><ul><li>Worldwide Loyal Customers; 44% overseas sales </li></ul></ul></ul><ul><ul><ul><li>Diversified product line with the first electrical powered heavy machine </li></ul></ul></ul><ul><ul><ul><li>Large buy backs: $7.5 billion in stock </li></ul></ul></ul><ul><ul><ul><li>Factors stimulating sales: increasing mining, and oil and gas exploration activities </li></ul></ul></ul><ul><ul><ul><li>Distribution system; mostly dealerships are independent and locally owned </li></ul></ul></ul><ul><ul><ul><li>Important stock capitalization </li></ul></ul></ul>
  7. 7. SWOT Analysis <ul><li>WEAKNESSES: </li></ul><ul><ul><ul><li>Slow down in the US housing market with increasing inflation </li></ul></ul></ul><ul><ul><ul><li>Critical Debt to equity ratio </li></ul></ul></ul><ul><ul><ul><li>Truck engine demand </li></ul></ul></ul><ul><ul><ul><li>US Recession would reduce demand for Asian manufactured goods, and therefore affect foreign corporate spending on Caterpillar products </li></ul></ul></ul>
  8. 8. SWOT Analysis <ul><li>Opportunities: </li></ul><ul><ul><ul><li>Slow down in the US housing market with increasing inflation </li></ul></ul></ul><ul><ul><ul><li>Critical Debt to equity ratio </li></ul></ul></ul><ul><ul><ul><li>Truck engine demand </li></ul></ul></ul><ul><ul><ul><li>US Recession would reduce demand for Asian manufactured goods, and therefore affect foreign corporate spending on Caterpillar products </li></ul></ul></ul>
  9. 9. SWOT Analysis <ul><li>THREATS: </li></ul><ul><ul><ul><li>Legislation against toxic mission (LR: Carbone Dioxide) </li></ul></ul></ul><ul><ul><ul><li>Hard to liquid assets </li></ul></ul></ul><ul><ul><ul><li>Strong global competitors: Komatsu Ltd., Volvo Group AB, Hitachi Construction Machinery Co </li></ul></ul></ul>
  10. 10. Ratio Analysis
  11. 11. FCFF <ul><li>650 million outstanding shares </li></ul><ul><li>Predicted value of 92.06% in 2010 </li></ul><ul><li>Based on objective of matching the industry P/E of 15 </li></ul>
  12. 12. Recommendation <ul><li>Strong reputation </li></ul><ul><li>Dominates the industry </li></ul><ul><li>Right Financial health to prosper and acquire new competition </li></ul><ul><li>Short-run risks offset by diversified business competencies </li></ul><ul><li>Heavy debt and the possibility of emissions legislation might adversely affect the company in the long run </li></ul><ul><li>Recommendation: Buy Short Term </li></ul>

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