Caterpillar (CAT) Industry Analysis

Industry Analysis Heavy Machinery Caterpillar competes with different companies in different segments, but most of its competitors are major multinational corporations. Recently, however, smaller regional manufacturers, mostly based out of China, are increasing their presence in Asia. The performance of the machinery manufacturing industry is a leading indicator of global macro conditions. It depends on end user demand for commodities, energy and infrastructure development. Major players in the industry include: Based out of Sweden, Volvo manufactures construction equipment and industrial engines AB Volvo generated revenues of VOLVO AB Volvo (VOLVY) $44.9bn in 2012 The Tokyo based manufacturer sells products and services similar to those of Caterpillar's. It operates in the construction, mining and utilities segment. Komatsu (KMTUY), KOMATSU Komatsu reported sales of $25.2bn in 2012 Headquartered in Moline, IL Deere's construction and forestry division manufactures machines and parts used in harvesting, earthmoving, excavation Deere Co. (DE) JOHN DEERE and similar activities. Deere's sales were $35.6bn in 2012 Headquartered in Milwaukee, WI the company operates under two segments: underground and surface mining. Joy Global (JOY) JOYGLOBAL Joy's 2012 sales were $5.7 billion Market Share DOYGLOBAL 4% KOMATSU 15% 22% VOLVO CAT 21% 38% Market Share based on revenues in US $ for publicly listed companies Market Industry Trends Construction Industries The Architecture Billings Index (ABI), which tracks demand for architectural services from industrial and commercial customers, rose more than 2.5 points from the second quarter (2Q) of 2013 to 3Q. This can be taken as an indication of growth in CAT's Construction Industries segment nine to 12 months down the road. Architecture Billings Index 55 54 53 52 51 50 49 48 47 46 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 New housing market is up 18% since the beginning of 2011. Growth in construction has been driven by private spending which is up 44.5% over the same period. On the other hand, public construction spending has decreased a little over 4% over the same period. Residential Construction Spending -Public Nonresidential Const Spending Private Residential Const Spending $340,000 $320,000 $300,000 $280,000 $260,000 $240,000 $220,000 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 Resource Industries The run up in commodity prices, spurred by growth in China and emerging markets, peaked in 2008. Since then, falling commodity prices have resulted in production cutbacks and surplus capacity in the mining sector. Prices regained some momentum in 2011, but have been trending lower since. Coal Pricing CAPP Coal (USD/ton) China Cooking Coal (USD/ton) $80 $75 $70 $65 $60 $55 $50 $45 $40 $35 $30 1QFY11 2QFY113 QFY114 QFY111 QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY133 QFY13 LME Copper ($/mt) 10,000 9,500 9,000 8,500 8,000 7,500 7,000 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 Industry Coal mining Metal mining Natural gas Aug 2013 Capacity Utilization 86.3% 68.9% 79.7% SOURCES: BIDNESS Company Data, SEC filings, Bloomberg Professional Services etc. DISCLAIMER: Bidness Etc(TM) and related marks are owned by Bidness Etc. Any other trademarks appearing on this website are the property of their respective owners, and are not used to indicate the origin of goods or services offered or provided by Bidness Etc herein or to suggest approval for or affiliation with Bidness Etc.