Is Caterpillar’s Stock a Safe Bet in Today’s Economy?

December 21, 2012

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E = Equity to Debt Ratio Is Normal

The debt-to-equity ratio for Caterpillar barely qualifies as normal. In most industries, their debt-to-equity ratio would classify as high. However, if you take a look at the debt-to-equity ratios for CNH Global NV (NYSE:CNH) and Deere & Company (NYSE:DE), you will see that Caterpillar fits right in. A similar story exists with the balance sheets.

	Debt-To-Equity	Cash	Long-Term Debt
CAT	2.22	$3.39 Billion	$39.86 Billion
CNH	1.96	$5.22 Billion	$17.56 Billion
DE	4.73	$6.12 Billion	$34.42 Billion

T = Technicals on the Stock Chart Are Mixed

Caterpillar’s stock has enjoyed a great run over the past three years. However, the stock has lost momentum over the past two years.

	1 Month	Year-To-Date	1 Year	3 Year
CAT	9.42%	1.06%	5.00%	66.26%
CNH	11.26%	37.36%	39.88%	100.30%
DE	1.33%	13.63%	19.96%	69.48%

At $89.64, Caterpillar is currently trading above its 50-day and 100-day SMA, but still trading below its 200-day SMA.

50-Day SMA	85.01
100-Day SMA	86.21
200-Day SMA	91.06

E = Earnings and Revenue Have Been Strong

Revenue and earnings have both been strong since the 2009 bottom.

	2007	2008	2009	2010	2011
Revenue ($)in billions	44.96	51.32	32.40	42.59	60.14
Diluted EPS ($)	5.37	5.66	1.43	4.15	7.40

Looking at the last quarter on a YoY basis, we see an increase in revenue and earnings.

	9/2011	12/2011	3/2012	6/2012	9/2012
Revenue ($)in billions	15.72	17.24	15.98	17.37	16.44
Diluted EPS ($)	1.71	2.33	2.37	2.54	2.54

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