Thursday, June 24, 2010

Stock Buy: Caterpillar

Caterpillar (CAT: 63.92 -0.41 -0.64%) is a blue chip industrial company that does business around the globe. If you believe in the global economic growth story, they you want to own a name like CAT.
Growth and Income
The company is expected to grow its earnings per share 45.2% in 2010, 47.0% in 2011, and 14.0% over the next three to five years. The stock also offers investors a dividend yield of 2.6%.
This Zacks #2 Rank stock trades at 20.3x 2010 consensus EPS estimates and 13.8x 2011 consensus EPS estimates.
Caterpillar manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines worldwide.
First-Quarter Results
First-quarter sales and revenues of $8.238 billion were down from $9.225 billion in the first quarter of 2009. Caterpillar earned $0.50 per share, easily beating the Zacks Consensus Estimate by 11 cents, or 28.2%.
Chairman and CEO Jim Owens said, “economic conditions are definitely improving, particularly in the world’s developing economies. Industry activity and orders are significantly higher than last year and are at record levels in some areas.”
The company also increased its outlook for full-year 2010. It now expects revenues of $38 billion to $42 billion and EPS of $2.50-$3.25. Owens indicated that the main driver behind its higher guidance is strength in the emerging markets of Asia and Latin America.
After the company’s better-than-expected Q1 report, the Zacks Consensus Estimate for 2010 increased 50 cents, or 18.7%, to $3.17. The 2011 Zacks Consensus Estimate climbed 63 cents, or 15.6%, to $4.66.
Vision 2020 Strategy
Caterpillar’s vision for the future includes its products, services, and solutions helping customers succeed, a world class supply chain, and a business model that drives superior results.
Moreover, the company’s specific goals for the next five years are focused on delivering superior results (EPS and cash flow), developing the best team of people, and becoming the global leader everywhere it does business.

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