Stock Analysis

Team Members

Louis-Philippe Edger

Gad Elharrar

Nicolas Murcia

Joseph de la Plante

Presentation Overview

1. COMPANY OVERVIEW

2. INDUSTRY PROFILE

3. SWOT ANALYSIS

4. FINANCIAL ANALYSIS

5. RECOMMENDATION

Company Profile

•Core Business:– Machinery & Equipment– Engines– Financial Products

•After Market Services

•50% of sales overseas

•Market Capitalization: 43B$

Industry Overview

•Capital Intensive

•Highly Cyclical

•Recently: Renewed investment in mining and industrial sectors

•Weak Housing Market

•Emissions standards

SWOT Analysis

STRENGTHS:1. Good Customer Service; After-sales for the heavy industry

2. Worldwide Loyal Customers; 44% overseas sales

3. Diversified product line with the first electrical powered heavy machine

4. Large buy backs: $7.5 billion in stock

5. Factors stimulating sales: increasing mining, and oil and gas exploration activities

6. Distribution system; mostly dealerships are independent and locally owned

7. Important stock capitalization

SWOT Analysis

WEAKNESSES:1. Slow down in the US housing market with increasing

inflation

2. Critical Debt to equity ratio

3. Truck engine demand

4. US Recession would reduce demand for Asian manufactured goods, and therefore affect foreign corporate spending on Caterpillar products

SWOT Analysis

Opportunities:1. Slow down in the US housing market with increasing

inflation

2. Critical Debt to equity ratio

3. Truck engine demand

4. US Recession would reduce demand for Asian manufactured goods, and therefore affect foreign corporate spending on Caterpillar products

SWOT Analysis

THREATS:1. Legislation against toxic mission (LR: Carbone

Dioxide)

2. Hard to liquid assets

3. Strong global competitors: Komatsu Ltd., Volvo Group AB, Hitachi Construction Machinery Co

Ratio Analysis

Cat Industry S&P 500

Price 66.88 P/E 12.7 14.2 20.4 P/E

(fwd) 11.9 12.8 17

PEG .9 .9 1.5 P/B 4.7 4.6 4.4 EPS 5.173 ??

P/cash flow

9.3 12.4 14.9

ROE 46.94% 35.2% 20.1% ROA 7.2% 8.3% 8% Profit

Margin 8.52%

Dividend yield

1.8 1.4 1.8

Free Cash ($b)

3.124

% of industry revenue

72.47

Debt/ total

Capital 79.9 31.1

FCFF

• 650 million outstanding shares

• Predicted value of 92.06% in 2010

• Based on objective of matching the industry P/E of 15

Recommendation

• Strong reputation• Dominates the industry• Right Financial health to prosper and acquire new competition• Short-run risks offset by diversified business competencies• Heavy debt and the possibility of emissions legislation might

adversely affect the company in the long run

Recommendation: Buy Short Term