Is Caterpillar’s Stock Still Attractive?

January 28, 2013

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E = Equity to Debt Ratio Is Weak

The debt-to-equity ratio for Caterpillar is weak, which you might not have expected. This company has been using debt to fuel growth. That’s great for the near term, but bad for the long term, especially if the company is pessimistic on demand increases and the economy isn’t on sure footing. The balance sheet is weak. Operating cash flow is $4.76 billion, which would normally be good, but not for a company the size of Caterpillar. If you want to own shares in a conglomerate with quality debt management, a decent balance sheet, and a slightly higher yield, then consider 3M Company (NYSE:MMM).

	Debt-To-Equity	Cash	Long-Term Debt
CAT	2.22	$5.69 Billion	$39.85 Billion
UTX	0.86	$4.82 Billion	$23.22 Billion
MMM	0.33	$4.53 Billion	$6.00 Billion

T = Technicals on the Stock Chart Are Strong

Caterpillar has outperformed United Technologies Corp. (NYSE:UTX) and 3M Company over a three-year time frame, but it has underperformed both companies over the past year.

	1 Month	Year-To-Date	1 Year	3 Year
CAT	9.02%	6.66%	-12.19%	82.40%
UTX	9.35%	9.49%	19.03%	41.09%
MMM	8.08%	8.34%	17.95%	33.16%

At $97.13, Caterpillar is currently trading above all its averages.

50-Day SMA	89.29
100-Day SMA	87.85
200-Day SMA	89.02

E = Earnings Have Been Steady

Earnings and revenue have been improving on an annual basis since 2009.

	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

We already know what happened this quarter. Now let’s take a look at what happened in previous quarters.

	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	2.32	2.37	2.54	2.54

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