Caterpillar stock outperforms its smaller peers

we believe that caterpillar stock (NYSE: CAT) is now a better choice than its peers. telex stocks (NYSE: TEX), given better prospects. Caterpillar trades at a relatively high valuation of 2.1x compared to just 0.7x for Terex, given Caterpillar’s excellent revenue growth, profitability and low financial risk, as discussed below. , this valuation difference is justified.

Looking at stock returns, Caterpillar, which has returned 14% this year, is 1% lower than Terex’s stock. This contrasts with the return of -16% for the broader S&P 500 Index over this period. In the section below, he explains why over the next three years he thinks CAT stocks will provide better returns than his TEX stocks. Interactive dashboard analysis compares several factors such as historical revenue growth, returns, and ratings. caterpillar vs telex: Which stock is the better bet? Some of the analysis is summarized below.

1. Caterpillar’s revenue growth is excellent

  • Both companies saw revenue growth in recent quarters. Still, Caterpillar’s 17.0% revenue growth over the last 12 months is slightly ahead of Terex’s 13.8%.
  • However, on longer timeframes, sales for both companies are down. Caterpillar’s sales fell by 0.7% to his $51 billion at an average annualized rate in 2021 compared to his $54.7 billion in 2018. In contrast, Terex sales averaged 2.2% to $3.9 billion in 2021, compared to $4.5 billion in 2021. 2018.
  • An improved pricing environment has fueled Caterpillar’s earnings growth in recent quarters.
  • Caterpillar is also benefiting from higher commodity prices. Rising commodity prices have led to increased capital spending by miners, boosting demand for Caterpillar’s mining equipment. In fact, the resources industry was Caterpillar’s best-performing segment in the nine months to September 2022. This is driven by high end-user demand for heavy construction and mining equipment.
  • Terex is a global manufacturer of lifting and material processing products whose revenue growth in recent years has been impacted by Covid-19, which has weighed on demand for aerial work platforms (elevating work platforms).
  • Terex has seen a resurgence in demand for its aerial platforms, material handling equipment, concrete mixer trucks and cranes over the past year or so and expects this trend to continue in the near future. Additionally, Terex also benefits from better pricing.
  • our Caterpillar Earnings Comparison When Terex earnings comparison Dashboards provide more insight into company sales.
  • Caterpillar’s revenue growth is expected to outpace Terex over the next three years. The table below summarizes the revenue projections for both companies over the next three years. Based on Trefis Machine Learning analysis, Terex has a CAGR of 3.1%, while Caterpillar has a CAGR of 8.7%.
  • Note that companies negatively impacted by Covid and those unaffected or positively impacted by Covid have different methodologies when forecasting future earnings. For companies impacted by COVID-19, we take into account the trajectory of quarterly earnings recovery and expect a return to pre-COVID profitability. Beyond the recovery point, we apply the average annual growth rate observed in the three years before Covid to simulate a return to normal conditions. For companies that have recorded positive revenue growth during Covid, we consider their pre-Covid annual average growth with a certain weight on their growth during Covid and in the last 12 months.

2. Caterpillar is more profitable and less financially risky

  • Caterpillar’s operating margin of 13.1% over the last 12 months is better than Terex’s 9.9%.
  • This compares to the figures of 14.6% and 9.7% respectively seen in 2019 before the pandemic.
  • Caterpillar’s free cash flow margin of 11.4% is also better than Terex’s 1.8%.
  • our Caterpillar operating profit comparison When Telex Operating Profit Comparison The dashboard has details.
  • When it comes to financial risk, Caterpillar is ahead of the other two. Debt as a percentage of equity of 3.4% is much lower than Terex’s 28.2% and cash as a percentage of assets of 7.8% is in line with Terex’s, suggesting Caterpillar has a better debt position. , meaning they both have similar cash cushions. .

3. All nets

  • We can see that Caterpillar has shown better revenue growth, is more profitable and has a better debt position. Terex, on the other hand, has a similar cash cushion and trades at relatively low valuations.
  • Given the volatility of P/E and P/EBIT, looking at the outlook on a P/S basis, we believe Caterpillar is the better choice at the moment, albeit at a higher valuation.
  • The table below summarizes the earnings and earnings forecasts for both companies over the next three years and shows expected earnings. 8% Caterpillar vs. -6% Based on Trefis machine learning analysis, investors are better off buying CAT over TEX –caterpillar vs telex –We also provide details on how to arrive at these numbers.

CAT may outperform TEX strains, but Fellow Caterpillar Price for metrics that matter. For other valuable comparisons of companies in various industries, please visit: peer comparison.

Additionally, the Covid-19 crisis could create a number of price discontinuities, offering attractive trading opportunities. For example, you might be surprised at how counterintuitive stock valuations can be. FedEx vs Amerco.

CAT shares are up 14% this year despite rising inflation and the Fed raising interest rates. But do you fall from here? See how much Caterpillar’s stock has fallen by comparing losses in previous market crashes. Here’s an overview of all stocks’ performance in previous market crashes.

What if you’re looking for a more balanced portfolio instead? high quality portfolio When Multi-strategy portfolio It has consistently outperformed the market since the end of 2016.

Return value December 2022
MTD [1]
YTD [1]
total [2]
CAT return 0% 14% 154%
TEX return -Five% -1% 38%
S&P 500 Returns -1% -16% 80%
Trefis Multi-Strategy Portfolio 0% -18% 231%

[1] Month-to-date and Year-to-date as of 14 December 2022
[2] Cumulative total return since the end of 2016

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The views and opinions expressed herein are those of the authors and do not necessarily reflect those of Nasdaq, Inc. Caterpillar stock outperforms its smaller peers

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