Critical Contrast: Caterpillar (CAT) and Its Rivals

Caterpillar (NYSE:CAT) is one of 436 public companies in the “Machinery” industry, but how does it contrast to its peers? We will compare Caterpillar to similar businesses based on the strength of its dividends, risk, valuation, institutional ownership, earnings, profitability and analyst recommendations.

Dividends

Caterpillar pays an annual dividend of $6.52 per share and has a dividend yield of 1.1%. Caterpillar pays out 25.6% of its earnings in the form of a dividend. As a group, “Machinery” companies pay a dividend yield of 2.8% and pay out 24.6% of their earnings in the form of a dividend. Caterpillar has increased its dividend for 30 consecutive years. Caterpillar lags its peers as a dividend stock, given its lower dividend yield and higher payout ratio.

Profitability

This table compares Caterpillar and its peers’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Caterpillar	15.21%	59.87%	11.99%
Caterpillar Competitors	-1,044.42%	-14.99%	0.57%

Analyst Ratings

This is a breakdown of current ratings and price targets for Caterpillar and its peers, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Caterpillar	0	12	15	0	2.56
Caterpillar Competitors	4195	14693	18192	804	2.41

Caterpillar currently has a consensus price target of $898.25, suggesting a potential upside of 51.90%. As a group, “Machinery” companies have a potential upside of 31.44%. Given Caterpillar’s stronger consensus rating and higher possible upside, analysts clearly believe Caterpillar is more favorable than its peers.

Risk & Volatility

Caterpillar has a beta of 1.65, meaning that its share price is 65% more volatile than the S&P 500. Comparatively, Caterpillar’s peers have a beta of 5.11, meaning that their average share price is 411% more volatile than the S&P 500.

Institutional and Insider Ownership

71.0% of Caterpillar shares are held by institutional investors. Comparatively, 51.7% of shares of all “Machinery” companies are held by institutional investors. 0.3% of Caterpillar shares are held by company insiders. Comparatively, 14.2% of shares of all “Machinery” companies are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Caterpillar and its peers gross revenue, earnings per share and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Caterpillar	$67.59 billion	$8.88 billion	23.20
Caterpillar Competitors	$4.64 billion	$364.05 million	3.93

Caterpillar has higher revenue and earnings than its peers. Caterpillar is trading at a higher price-to-earnings ratio than its peers, indicating that it is currently more expensive than other companies in its industry.

Summary

Caterpillar beats its peers on 10 of the 15 factors compared.

Caterpillar Company Profile

Caterpillar Inc. manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives in worldwide. Its Construction Industries segment offers asphalt pavers, compactors, road reclaimers, forestry machines, cold planers, material handlers, track-type tractors, excavators, telehandlers, motor graders, and pipelayers; compact track, wheel, track-type, backhoe, and skid steer loaders; and related parts and tools. The company's Resource Industries segment provides electric rope and hydraulic shovels, draglines, rotary drills, hard rock vehicles, tractors, mining trucks, wheel loaders, off-highway and articulated trucks, wheel tractor scrapers and dozers, fleet management products, landfill and soil compactors, machinery components, autonomous ready vehicles and solutions, work tools, and safety services and mining performance solutions, as well as related parts and services. Its Energy & Transportation segment offers reciprocating engine powered generator sets; reciprocating engines, drivetrain, and integrated systems and solutions; turbines, centrifugal gas compressors, and related services; and diesel-electric locomotives and components, and other rail-related products. The company's Financial Products segment provides operating and finance leases, installment sale contracts, revolving charge accounts, repair/rebuild financing services, working capital loans, and wholesale financing; and insurance and risk management products and services. Its All Other Operating segment offers filters and fluids, undercarriage, ground engaging tools, fluid transfer products, precision seals, and rubber sealing and connecting components; parts distribution; logistics solutions and distribution services; brand management and marketing strategy services; and digital investments services. Caterpillar Inc. was founded in 1925 and is headquartered in Irving, Texas.