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Caterpillar and Farm and Construction Machinery Industry Multiples

Caterpillar and Farm and Construction Machinery Industry Multiples. Mod 3 Kevin Lenart. Caterpillar.

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Caterpillar and Farm and Construction Machinery Industry Multiples

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  1. Caterpillar and Farm and Construction Machinery Industry Multiples Mod 3 Kevin Lenart

  2. Caterpillar • “With 2012 sales and revenues of $65.875 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services and Progress Rail Services.” (“Company,” caterpillar.com)

  3. Caterpillar (cont.) • Segments • Construction Industries – infrastructure and building construction • Energy and Power Systems – energy solutions and applications • Resource Industries – mining, lumber • Customer and Dealer Support – support, parts, training • Financial Products - financing • 2012 • Ranked 46 on Fortune 500 list • $2.5 billion spent on R&D • Record sales, revenues, profits

  4. Data

  5. Shares trading at $89.77 - Sell

  6. Shares trading at $89.77 - Sell

  7. Shares trading at $89.77 - Sell

  8. Shares trading at $89.77 - Sell

  9. Shares trading at $89.77 - Sell

  10. Shares trading at $89.77 - Buy

  11. Shares trading at $89.77 - Buy • Choosing CapEx • Significant expense present in all four companies • Line item that gives an indication of company’s potential growth

  12. To Recap: • Overall decision: Sell • Majority of individual along with average (which is pulled up by high outliers) and median give sell recommendation

  13. Analysis of the Multiples Method • Not the best way to find the value of a company • Varying choices of multiples to use and (sometimes wildly) differing results among them • Difficult to identify truly comparable companies • Assuming comparable companies are fairly priced but company you are examining is not • Leverage effects on equity multiples • Fair value reporting of IFRS increases NEA of companies under their requirements

  14. Sources • "Caterpillar Form 10-K." Caterpillar.com. Caterpillar, 19 Feb. 2013. Web. 14 Jan. 2014. • "Company." Caterpillar.com. Caterpillar, 2013. Web. 14 Jan. 2014. • "Fortune 500 2012: Industry: Construction and Farm Machinery." CNNMoney. Cable News Network, 21 May 2012. Web. 14 Jan. 2014.

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