Caterpillar Inc. (CAT), CNH Global NV (CNH) – Equipping Growth: Agricultural and Construction Mammoths

Today, Caterpillar Inc. (NYSE:CAT) is wrestling with economic uncertainty in Europe, a relative year-to-year decline in backlog orders, and a lower demand in the mining segment. Also, the firm will complete the integration of Mining Machinery, and adjust inventory. For tomorrow, the company wishes to continue improving its service sector, and benefit from the recovery of the US economy – where it holds the dominant position.

Total revenue, net income, and cash flow have all experienced increments during the past decade. Last year, however, indicators took a small dive amid difficulties in the European market. Long-term debt, during the same decade, has progressively increased without reaching worrying levels. Last, operating margin sits one point below the industry mark of 12.7%.

Trading at 11.8 times its earnings, packing an 8% premium to the industry average, yielding 1.78%, paying a $0.52 dividend, and a price tag in the middle of the 52-week range, the stock is fairly valued. It is recommended to hold until Caterpillar Inc. (NYSE:CAT) improves performance since revenue and EPS continue to decline, and no further expansion of the Brazilian construction market is expected.

Tilling vs. Caving

Sure, the farm industry is at the mercy of the weather, something mining is not as exposed to. But the required capital to start a mining business is much greater than that required to start a farm business. Hence, the barriers to the agricultural industry are much lower. That is the reason for which there are, and there will be many more farmers than miners.

Such healthy competition within the agriculture market will push for equipment renovation pushing the demand. I prefer Deere & Company (NYSE:DE) CNH Global NV (NYSE:CNH) to Caterpillar Inc. (NYSE:CAT), and Deere & Company (NYSE:DE) to CNH Global NV (NYSE:CNH) because of its dominant market position and customer loyalty.

The article Equipping Growth: Agricultural and Construction Mammoths originally appeared on Fool.com and is written by Vanina Egea.

Vanina Egea has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Vanina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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