Caterpillar is a Solid Pick During Uncertain Times

CAT stock has the potential power to thrive in the long-term pending earnings slated for today

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Caterpillar Inc. (NYSE:CAT) is the world’s largest manufacturer of heavy equipment such as engines, construction and mining equipment. The American company also owns countless brands across the globe. Furthermore, the company's quarterly report yesterday, Oct. 27,  likely has investors searching for the tale of the tape. As of today, CAT stock is up about 7% year-to-date. CAT stock has nearly doubled since tapping its 52-week low of $87.50.

Caterpillar has a market cap of $88.37 billion and a book value of $25.36 per share. The company's price-to-book ratio stands at 6.69. Caterpillar has a trailing price-earnings ratio of 22.65 and a forward price-earnings ratio of 23.42. The company's trailing 12-month price-earnings ratio is 21.80.

Caterpillar has grown its total revenue annually in 2016, 2017, and 2018. In 2017, the company increased revenue by nearly $7 billion, or roughly 18%. Caterpillar increased its revenue to $45.46 billion in 2017. In the following year, 2018, Caterpillar increased revenue by more than $9 billion, or about 20%. The company had $54.72 billion in revenue that year. In 2019, though, Caterpillar saw a 1.67% decline in 2019. The company lost just under $1 billion in revenue last year. Caterpillar has produced $46.53 billion in revenue over the past 12 months and is on track to post significant annual revenue loss in 2020.

Caterpillar reported a significant increase in net income between 2016 and 2018. The company went from taking a net loss of $67 million to producing over $6 billion in profit. In 2019, the company maintained its net income. Caterpillar will likely be reducing its net income by $2-3 billion in 2020, but will likely still produce a substantial positive net income.

Caterpillar currently has $8.8 billion in cash and $38.65 billion in total debt. The company’s balance sheet holds $76.57 billion in total assets and $62.79 billion in total liabilities. Caterpillar's total equity stands at $13.78 billion.

The company has paid dividends consistently since 1989, and has steadily grown its dividend since 1992, making CAT stock a very desirable dividend stock. Caterpillar last paid a dividend of $1.03 per share. The company has 2.44% dividend yield, and will have paid $4.12 to investors in 2020.

Caterpillar has reported a drop in sales and a considerable drop in revenue this year, but has maintained a good price-earnings ratio of 21.80. The company is expected to boost its overall sales over the next 12 months, and the stock will continue to climb after the company resumes share buy-backs. Caterpillar stock also comes with 2.4% dividend yield and a very manageable balance sheet. Overall, the company is a safe investment for long-term dividend growth as well as good potential stock growth. Caterpillar is undoubtedly undervalued at the moment, but might yet present a better value with the continued uncertainty in the market that continues driving stock prices down.

 

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