CAT - Embedded Expectations Analysis - 2020 05 07
Caterpillar Inc. (CAT:USA) currently trades near historical averages relative to UAFRS-based (Uniform) earnings, with a 17.6x Uniform P/E. At these levels, the market expects the firm to see stable profitability, but management may be concerned about their sales guidance, cost initiatives, and dealer inventory levelsSpecifically, management may lack confidence in their ability to sustain service revenue growth, maintain their current EPS, and continue to reduce their allowance rate in their Financial Products business. In addition, they may be exaggerating their focus on delivering consistent shareholder returns and their ability to reduce order cycle times and improve cash flows. Moreover, they may have concerns about increases in equipment repossessions, reductions in dealer inventory, and global economy uncertainty. Furthermore, they may lack confidence in their ability to execute their lean cost reduction initiatives, improve pricing, and recover lost mining equipment sales due to ongoing caution around equipment spend
Caterpillar is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company segments include: Construction Industries, which supports customers using machinery in infrastructure, forestry and building construction; Resource Industries, which supports customers using machinery in mining, heavy construction, quarry and aggregates, waste and material handling applications; Energy and Transportation, which supports customers in oil and gas, power generation, marine, rail and industrial applications, including Cat? machines; and Financial Products, which provides financing and related services.
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