Caterpillar

Good evening to all

It's been a successful year for me on the whole. Please let me know what you think about my new purchases $CAT (+2,62 %)
$BATS (+1,84 %) $RHM . I am also thinking about getting into $TGT (+3,36 %) to get in.

Komatsu the alternative to Caterpillar?

Company presentation

Komatsu Ltd. is one of the world's leading manufacturers of construction and mining machinery, headquartered in Tokyo, Japan. Founded in 1921, the company has developed into a global corporation and is now active in over 140 countries.

Core business and main products

Komatsu's core business is the production and sale of construction and mining equipment. The broad product portfolio includes

• Hydraulic excavators
• wheel loaders
• bulldozers
• Dump trucks
• forestry machines
• Industrial machines such as grinding machines and press brakes

Komatsu also offers comprehensive financing solutions and aftermarket services.

Mission and vision

Under the guiding principle "Creating value together", Komatsu pursues the goal of shaping a sustainable future in which people, companies and the environment thrive in harmony through technological innovation and advances in manufacturing.

Foundation and early years

Komatsu was founded in 1921 by Meitaro Takeuchi in the city of Komatsu, Japan, with the aim of providing new jobs for the local community after the closure of a nearby copper mine.

Business model & core competencies

Komatsu relies on a diversified business model with multiple revenue streams:

• Construction and mining equipment
• Industrial machinery and other products
• Financial services

Competitive advantages

• Global presence and strong market position, particularly in Asia and America
• Comprehensive product portfolio for various industrial sectors
• Focus on innovation, especially in the field of autonomous and electric machines
• Strong production capacities with 25 production sites worldwide

(America is the most important market and twice as large as Asia. The other regions also contribute to sales and are largely equally represented. Most regions are in decline).

Future prospects & strategic initiatives

Komatsu is investing heavily in intelligent construction machinery and autonomous mining trucks. Ambitious development projects include underwater electric bulldozers and lunar excavators.

Market position & competition

As the world's second largest construction machinery manufacturer, Komatsu competes with companies such as:

• $CAT (+2,62 %) (USA)
• Volvo Construction Equipment
• $HTCMY Construction Machinery (Japan)

Total Addressable Market (TAM)

The global construction equipment market is estimated at USD 171.1 billion in 2023 and is expected to grow at a compound annual growth rate (CAGR) of 6% between 2024 and 2032, driven by infrastructure investments and urbanization in emerging markets. Komatsu is well positioned to capitalize on this growth, particularly in the key markets of Asia and the Americas.

Share performance

$6301 (+1,44 %) Komatsu is listed in the Nikkei 225 Index and has achieved a TR of 91% (13.8% CAGR) over the past 5 years. Caterpillar is at 193% TR and thus clearly outperformed.

For the development (company figures), a better view and more, check out the free blog: https://topicswithhead.beehiiv.com/p/komatsu-die-alternative-zur-caterpillar

Conclusion

We don't need to beat around the bush: Caterpillar was clearly the better stock, made clear decisions and showed a superior performance. This is especially true when calculated in dollars or euros, where Komatsu has made just 20% over 5 years (excluding dividends), but this does not mean that Komatsu is not a good stock. There is a change going on in Japan, including at Komatsu, where companies are rethinking and adjusting their capital allocation. As a result, management is increasingly focusing on share buybacks, dividend increases and improved capital efficiency. This is also indicated by Komatsu's management.

With these measures, the stock can perform significantly better than it has in the past, assuming the company stays the course. Even if the figures are worse overall, they still show an increase, and in some areas capital efficiency is above 10%. The problem in general is, albeit "only" the yen.

Komatsu's EV-to-EBITDA ratio is about half that of Caterpillar, which means Komatsu can catch up here, and by unusual measures. In other words, expectations are lower, which represents an opportunity to exceed them.

In addition to the positive trend in the industry, there are also other interesting topics. The yen is significantly weaker than the US dollar, which is causing some stocks to underperform, but this could change.

If more capital is withdrawn from the balance sheet, this is beneficial for shareholders and puts less pressure on the key figures. It makes you better on a dollar basis. What has happened recently could be beneficial for foreign investors.

The share is cheap, which is justified, but offers plenty of scope for further growth.

So who might be interested in the stock? It could be attractive to those who believe in long-term growth and a solid strategy. Investors who are prepared to tolerate waiting and who are betting on a possible capital allocation and dividend increases will find interesting potential in this share. For those hoping for a stabilization of the yen against the dollar and positive market developments in Japan, Komatsu could also be a choice worth considering. For everyone else, Caterpillar is clearly the better stock.

What does this mean for me? I am actually looking for a cheap alternative to Caterpillar, and Komatsu would be ideal. However, the yen is extremely weak at the moment, which makes it less attractive. That's why I'm holding back for the time being.

An entry would make sense for me if the management has actively shown that it is improving the balance sheet and deploying capital more efficiently. A recovery in the yen/dollar exchange rate would also be crucial.

However, if both factors improve, an entry would be interesting for me. Basically, there is nothing significant wrong with the company itself.

Further trading profits from put KOs on $SNOW (-1,45 %) and $CAT (+2,62 %) reinvested.

$COST (+1,94 %) is always too expensive anyway, so what solls🤷‍♂️

30% of Snow's profits remain in the bill, as the figures are due next week and 3 of the last 4 quarterly figures each resulted in a massive sell-off.

#beerchallenge from Kölle

My favorite place every 14 days to let the stock market be the stock market and simply enjoy life, the emotions and the stupid chatter of my over-70 neighbors.

Next week will be relatively quiet for me, as I'm traveling in Switzerland and only have 3 open trades.

$ASML (+0,8 %) which is still just in profit and has fortunately held the zone.

$TSN (+0,57 %) where I am considering exiting with +20% before the figures on Tuesday

And since the sell-off Friday $CAT (+2,62 %)

Have a nice weekend 🫡

All of these shares reached new ALL-TIME HIGHS at some point today ⤵️

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Who benefits from the reconstruction of Ukraine?

Yes, it's a macabre topic - but the reconstruction of Ukraine will bring investment and economic opportunities that are already being talked about. The question is: which companies could benefit the most? Will construction companies like $DG (+0,05 %) and $HOT (+1,08 %) , machine manufacturers such as $CAT (+2,62 %) or energy companies like $ENR (+2,43 %) get the biggest contracts? Who do you think could play a central role in this reconstruction project?

Caterpillar Q3 2024 $CAT (+2,62 %)

Financial performance

Revenue and earnings: In the third quarter of 2024, Caterpillar generated revenue of $16.1 billion, a slight decrease compared to $16.8 billion in the third quarter of 2023.

Operating profit: Operating profit for Q3 2024 was $3.1 billion, a decrease of 9% compared to $3.4 billion in the prior year quarter.

Adjusted earnings per share: Adjusted earnings per share were $5.17 in Q3 2024, compared to $5.52 in Q3 2023.

Balance sheet overview

Total assets: As at September 30, 2024, total assets amounted to USD 86.3 billion, a slight decrease compared to USD 87.5 billion at the end of 2023.

Total liabilities: Total liabilities amounted to USD 66.9 billion as at September 30, 2024, compared to USD 68.0 billion at the end of 2023.

Details of the income statement

Operating profit margin: The operating profit margin for Q3 2024 was 19.5%, while the adjusted operating profit margin was 20.0%.

Restructuring costs: Restructuring costs impacted earnings per share by USD 0.11 in Q3 2024.

Cash flow overview

ME&T free cash flow: For Q3 2024, ME&T free cash flow amounted to USD 5.6 billion, with expectations to be at the upper end of the annual target range of USD 5 to 10 billion.

Key performance indicators and profitability metrics

Adjusted operating profit margin target: Adjusted operating profit margin target is in the range of 10-14% on $42 billion in sales and 18-22% on $72 billion.

Segment information

Construction: Sales fell by 9% to USD 7.0 billion in Q3 2024, while segment profit declined by 20%.

Raw materials industry: Sales fell by 10% to USD 3.0 billion, with a 15% decline in segment profit.

Financial Products: Total revenue increased by 6% to USD 1.034 billion and segment profit increased by 21%.

Competitive position

The results reflect the benefits of the diversity of Caterpillar's end markets, which support long-term profitable growth.

Forecasts and management commentary

Outlook 2024: Revenue and earnings are expected to be slightly below prior expectations, but guidance for adjusted operating profit margin and adjusted earnings per share remain unchanged.

Free cash flow: ME&T free cash flow for the full year is expected to be near the upper end of the $5 billion to $10 billion target range.

Risks and opportunities

Caterpillar continues to execute its strategy for long-term profitable growth and capitalizes on the diversity of its end markets

Summary of results

Caterpillar's performance in the third quarter of 2024 showed a slight decline in operating profit and adjusted earnings per share compared to the prior year, mainly due to lower sales volumes in key segments such as construction and materials handling. Nevertheless, the company maintains a strong cash flow position and expects to achieve its financial targets for the full year. The diversity of its end markets remains a strategic advantage that supports its long-term growth targets.

Positive Aspects

Growth in the Financial Products segment: The Financial Products segment reported a 6% increase in total revenues to USD 1.034 billion, while segment profit increased by 21%. This growth was boosted by higher average yield activities and financing rates.

Strong free cash flow: ME&T free cash flow for Q3 2024 amounted to USD 5.6 billion, and the company expects full-year free cash flow to be near the upper end of the target range of USD 5 to 10 billion. This indicates strong cash generation capabilities.

Adjusted operating profit margin: The company delivered a robust adjusted operating profit margin for Q3 2024, which is expected to be above the upper end of the full year target range.

Diversity of end markets: Caterpillar's results reflect the benefits of the diversity of its end markets, which supports long-term profitable growth and provides resilience to market volatility.

Stable tax rate: The effective tax rate for Q3 2024 was 20.7%, down slightly from 20.9% in the prior year, helping to maintain profitability.

Negative aspects

Decline in sales in the Construction Industry segment: The Construction Industry segment reported a 9% decline in total revenue to USD 7.0 billion, while segment profit fell by 20%. This decline was mainly due to lower sales volumes in North America and unfavorable currency developments in Latin America and the Asia-Pacific region.

Loss in the Resource Industry segment: Sales in the Resources Industry segment fell by 10% to USD 3.0 billion, with a 15% decline in segment profit, largely due to lower sales volumes.

Overall revenue decline: Total revenue for Q3 2024 was slightly below the previous year's level, indicating challenges in maintaining growth in the various segments.

Impact of restructuring costs: Restructuring costs negatively impacted earnings per share by $0.11, which could indicate ongoing adjustments and potential disruption.

Earnings next week 🚀

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