Financial Ratio and Caterpillar Essay
Caterpillar is a company in the United States that makes engines tractors bulldozers and a lot of other kind of construction and mining equipment and they have many customers in the United States but also across the world. Caterpillar Is the leader in their industry because of their size and innovation of their machines and engines. The research conducted in this paper was to learn about the financial health, history and whether or not it would be a good idea to invest into Caterpillar and whether or not Caterpillar would be a good investment for the average investor. The History and background of caterpillar is discussed, so is the stock valuation and risk and the debt policy.
Table of Contents
History And Background
Caterpillar is an American corporation that designs, manufactures, markets and sells machinery and engines to customers worldwide. Caterpillar is the number one manufacturer of construction and mining equipment, diesel and natural gas engines. Caterpillar was founded in California on April 15, 1925. Today it s headquarters are located in Peoria Illinois. Caterpillar Inc. was incorporated in Delaware. Caterpillar employs about 125 thousand people around the world. Caterpillar operates all over the world with more than 100 facilities worldwide. But the
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The Key executives for caterpillar are David L. Calhoun who is currently the Chief Executive officer and has been since May 2010. Daniel M. Dickinson, Juan Gallardo, David R. Goode, Jesse J. Greene, JR. Caterpillar’s principle business is manufacturing construction and mining equipment as well as industrial gas turbine and diesel electric locomotives. Caterpillar’s principal customers and markets are mainly people who work in construction or manufacturing type jobs. People who need to do heavy duty work because caterpillar makes heavy-duty machinery like hydraulic excavators, backhoes, wheel loaders, and tractors.
In 1925 the Holt-Manufacturing Company and the C.L. Best Tractor Co. merge to form Caterpillar Tractor and Co. 1950 Caterpillar Tractor Co. in Great Britain is established the first of many overseas operations created to help manage foreign exchange shortage, tariffs, import controls and better serve customers around the world. In 1997 the company continued to expand, acquiring the U.K.- based Perkins engines and with the addition of Germany’s MaK Motoren the previous year, Caterpillar becomes the world leader in diesel engine manufacturing. Recent Events
In 2003 Caterpillar becomes the first engine manufacturer to offer a complete line of 2004 model year clean diesel engines fully compliant and certified by the U.S. Environmental Protection Agency. Caterpillar serves customers in over 180 countries around the globe and more than half of the sales are outside the United States, in countries like China, Russia, and Brazil. Since caterpillar is a manufacturing company that makes heavy-duty construction and mining equipment the people who but there products are usually large companies that are in those businesses and have the knowledge and personal to operate the machines that caterpillar makes.
Caterpillar approaches its market with innovative new ways to do the jobs people look to do, they are a global market leader in their field and they have a lot of loyal customers. Caterpillar’s stock for 2013 is trending upward since august and has been climbing steadily after hitting a year low in April. Caterpillar has recently said that it is committed to win in china where it has recently struggled.
Caterpillar doesn’t have many competitors but its main competitors are John Deere and Komatsu Ltd. Caterpillar is the largest among its competitors and has historically been the same way for a long time. The market cap for caterpillar is at 57.20B with John Deere is at 32.31B and Komatsu is at 23.49B. Also caterpillar has more employees that both John Deere and Komatsu, Caterpillar has 122,401 while John Deere has 66,900 and Komatsu has 46,730.
Caterpillar’s financial position over the past years have gotten better and better. Total revenues since 2009 have gone up so had gross profit. They have climbed at a steady rate since 2009. One of caterpillar’s great strengths is that they are one of the biggest global players in the industry pushing into the second largest market, which is the Asia pacific region and expanding aggressively into places like China, Brazil, and India. One of there weaknesses is that Europe accounts for nearly a quarter of Cat’s total revenues and impending crisis in the region is still a concern and could create a big dent in its top line if the situation gets worse.
Caterpillar does not have many competitors but the main competitors are has are John Deere and Komatsu. Most of the ratios for both John Deere and Komatsu are similar but Caterpillar edges them both out because they are the largest company out of the three by a substantial margin. Caterpillar’s ratios are at or around most of the industry averages for example the common stock ratios are all within excluding the payout ratio are within 1 of the industry averages. John Deere’s ratios are either at or below the industry averages for most of the ratios. Komatsu’s are mostly above the industry average suggesting it is in line with caterpillar because they have very similar ratio numbers. The operating margin for both Caterpillar and Komatsu are the same and John Deere leading with by 3 with a .14. Caterpillar leads all in annual dividend yield.
The financial statements for caterpillar have all gone up since 2009 but had a drastic drop between 2008 and 2009 because of the recession and revenue dropped from 51,000 in 2008 to 32,396, in 2009 and had been increasing steadily since the end of the recession has ended. All the number during the recession took a drastic turn downward but have all been steadily climbing since the end of the recession.
Caterpillar is around all the industry averages but not for all of them. All of its efficiency ratios are below the industry average meaning that they are either doing good or bad depending on what’s being measured.
When deciding on whether or not to invest on Caterpillar there are no contingencies in the company’s footnotes that would have any cause for concern. Any investor would have almost no concerns when investing into caterpillar.
Caterpillar is a leader in its industry because of its size and innovative new ways to do the jobs its machines and engines are suppose to do. They strive to find new ways to make their products and strive for better more efficient machines for the environment. They have engineers and others working on making there products better and able to handle any terrain anywhere in the world. Caterpillar has historically also been a leader because of better working machines and better ideas from there founders.
Caterpillar in early January 2013 announced two new facilities in the Tongzhou, Jiangsu Province. They opened these facilities to help meet the customer needs in China and other growth markets and they support the companies growing operation in china and growing in other markets. In December 2011 Caterpillar and Ariel corporation announced a 50-50 joint venture that will provide well service products for the global gas and oil industry.