Caterpillar: Of Lawsuits and Gold

Based out of Peoria, Illinois U.S Caterpillar Inc. is a corporation that designs, manufactures and markets machinery, engines, financial products and insurance. By gross volume of shipment Caterpillar Inc. is the largest distributor of construction and mining equipment, industrial gas turbines and diesel electric locomotives: ranked number 44 in 2009 Forbs Fortune 500 list. Operating in the open market under the stock symbol CAT, Caterpillar Inc. has a market capital and average volume of 64.71 billion and 5.78 million respectively. Founded in 1925 Caterpillar has had a profound impact on diesel and petrol locomotives and vehicular transportation used during both world wars. Looking at it from a macro perspective Caterpillar Inc. stock chart shows a significant rate of climb up until the end of fiscal year 2011 after which it largely flat lined, operating at a general stock share price of $102 per share. More recent statistics indicate Caterpillar stock has been on the rise during the first quarter of 2014 achieving its crest on the 10th of April this year.

Caterpillar stock graph and stock share prices are not just affected by the decisions taken by CAT Inc. leadership. The prices and stock performance of related, complementary goods such as gold, coal, oil and natural gas also affect Caterpillar’s earnings enormously. The recent slump in the price of gold (28%, its worst since 1981) meant tumultuous times for CAT Inc.’s mining equipment division. Revenue fell 15.5% as companies including but not limiting to Caterpillar began cutting back on capital expenditures. The overall decrease in net income negatively influenced investor interest in Caterpillar Inc. stock despite the reduced CAT stock share prices. A further testament to the degree to which outside factors influenced a company like Caterpillar Inc. is demonstrated by the fact that due to the gold slump the company had to terminate 10,000 employment contracts. In addition to the aforementioned, the fact that the U.S senate panel is initiating a corporate tax evasion investigation of the off-shore tax strategies of Caterpillar Inc. consequently reflects that CAT Inc. has not been able to leave its woes behind.

However, stock researchers such as Andrew Busch state that ruling the company out of the competition just yet would be a mistake. “This is an extremely well-run company,” Busch said in an editorial piece of The Busch Update. “This is a company that went from the 1980s when it was losing about a million dollars a day being the global leader in this pace…”  Following a better-than-expected sales forecast for 2014 and announcements to enter the Chinese market have had a positive impact on investor interest in CAT stock. Analysts also see opportunities in the Asia-Pacific in general. This can be attributed to the lack of any real competing company operating in this space.

The planned expansion into Chinese markets, the expected raise in the stock price of Gold and the general direction in which the top tier management is driving the company are all reasons to expect that Caterpillar Inc. will be able to escape its predicaments by the second quarter of 2014.

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