Consequently, Caterpillar fares better on this front.Įarnings Surprise: Caterpillar has delivered positive surprises in the prior four quarters, while Deere missed in one. Both have higher leverage than the industry's level of 42.2%. Caterpillar leads on this front compared with Deere and the Industrial Products sector's 6.1%.ĭeere has a net debt-to-capital ratio of 101.8% much higher than Caterpillar's 71.4%. Coming to Caterpillar and Deere, ROA for the trailing 12-months (TTM) is 6.5% and 4.0%, respectively. An above-average ROA denotes that the company in question is generating earnings by effectively managing assets. Return on assets (ROA) is one of the key financial ratios for industrials as they rely heavily on inventory to create revenues. However, Deere has registered better inventory turnover than Caterpillar. In the last year, the inventory turnover ratio for Deere and Caterpillar has been 4.2% and 3.2%, respectively, lower than the sector's level of 4.7%. This is one of the most important financial ratios, which is widely used by industrial companies to measure its ability to utilize inventories. A high inventory turnover ratio ensures that the company is able to manage its inventory effectively to generate revenues and avoid wastage. Inventory turnover ratio evaluates the efficiency of an industrial company's manufacturing process. Deere has an annualized dividend growth of 3.2% over the past five years, while Caterpillar's growth rate is at 6.1%. In June, Caterpillar rewarded its shareholders with a 10% dividend hike following Deere's 15% dividend hike in May. Both have better dividend yields compared with the overall sector's 1.8%. In terms of long-term earnings growth expectations, Caterpillar scores above Deere with a projection of 13.3% compared with the latter's 5.7%.įor income investors, Caterpillar has a higher dividend yield (2.3%) than Deere (2.0%). Caterpillar is cheaper in terms of valuation. Compared with sector's EV/EBITDA ratio of 13.6, Caterpillar and Deere are both cheaper propositions with respective reading of 8.7 and 11.4. The EV/EBITDA metric is usually used to compare two stocks within the same industry or sector and has an edge over other metrics such as P/E because it is not affected by the different capital structures of the two companies. Deere's 9.3% gain came in ahead of the Industrial Products sector's performance but lagged the S&P 500. Let's analyze both these stocks on some key metrics and see which deserves to be a part of your portfolio.Ĭaterpillar's stock has rallied 25.6% in the past year, against the Industrial Products sector's 0.4% dip and S&P 500's 14.2% rise. Investors keen on this sector is likely to be inquisitive about which one has the more attractive prospects. Caterpillar is the world's largest manufacturer of construction and mining equipment and also dabbles in agricultural equipment, while Deere is the one of the world's foremost producers of agricultural equipment as well as a leading manufacturer of construction, forestry, along with commercial and consumer equipment.īoth the stocks carry a Zacks Rank #3 (Hold) currently. ![]() CAT and Deere & Company DE are two heavyweights hogging the limelight in the sector with market capitalization of $81 billion and $45 billion, respectively. This instils optimism in the sector.Ĭaterpillar, Inc. ![]() The sector has an estimated long-term earnings growth of 11.6%, higher than the S&P500's 9.8%. Given these concerns, the industrial products sector (one of the 16 broad Zacks sectors) has declined 11.7%, against the S&P 500's climb of 3.4%, year to date.ĭespite this underperformance, per latest Earnings Trends report, the Industrial Products sector is expected to put up 24.5% growth in earnings in the second quarter of 2018 while revenues are expected to rise 10.9% in the quarter. While this was positive news for domestic steel players, the consumers of the metals ranging from construction, manufacturers of auto, aircrafts and machinery to beverage producers, were left worried that the higher tariffs will inflate their manufacturing costs. This was a bid to reinforce the American steel and aluminum industries which had long been reeling under the onslaught of cheap imports and suffered significant reduction in production as well as employment. ![]() Earlier in March, Trump implemented a tariff of 25% on steel imports and 10% on aluminum imports to counter an "assault on the country" by foreign competitors. China retaliated with tariffs on some imports from the United States. The trade war has finally been triggered with the Trump administration imposing tariffs of 25% on $34 billion in Chinese imports on Jul 6.
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