Morningstar Rating

Stock Research and Analysis

by Adam Fleck, CFA

Bulls Say

Caterpillar is the largest global manufacturer of heavy equipment. Although worldwide demand is largely still below its historical peak, we don't expect the firm to cede its dominant position.
Avoiding downtime is one of the most critical aspects for customers, and Caterpillar's extensive national dealer network and reputation for quality are key competitive advantages.
We estimate that Caterpillar and Komatsu together hold nearly 50% worldwide market share. The two compete heavily on service and technology, but we don't envision the need for either to enter a destructive price war. Read more 

Bears Say

Although Cat holds a large global market share, it trails Komatsu in China. Failure to provide a premium service network in the region could prevent the firm from competing with local players.
Caterpillar is substantially exposed to the mining end market, which is facing reduced demand because of lower commodity prices and slowing Chinese economic activity.
The integration of recently acquired MWM, EMD, and Bucyrus presents a continued near-term risk, and missteps (such as a large goodwill impairment at ERA Mining, a smaller purchase) have occurred. Read more 

Management

CEO Doug Oberhelman took over when Jim Owens retired in 2010. Oberhelman joined Caterpillar in 1975 and was head of the engine division before taking the reins of the entire firm. Similarly, Ed Rapp ascended to the CFO position after years of service   Read more 

Profile

Based in Peoria, Illinois, Caterpillar is the world's largest manufacturer of heavy construction machinery such as bulldozers, excavators, loaders, and equipment for surface   Read more 

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