CAT - Embedded Expectations Analysis - 2020 10 12
Caterpillar Inc. (CAT:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 27.9x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about their ability to expand margins, dealer inventory changes, and restructuring costsSpecifically, management may lack confidence in their ability to expand margins, their decision to reduce discretionary costs, and their ability to improve the Financial Products segment's net yield and earning asset base. In addition, they may have concerns about the impact of dealer inventory changes on sales, the sustainability of favorable manufacturing costs, and new business volume recovery. Moreover, they may be exaggerating the progress of their digital tool rollout to dealers and their focus on operational excellence, shorter lead times, and flexibility in manufacturing operations. Furthermore, they may have concerns about the expected costs of their restructuring plans, and they may be downplaying concerns about lost sales from their restructuring actions
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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