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Caterpillar and Deere are two of the largest heavy-equipment manufacturers in the world. Although the two companies make heavy equipment, their primary product offering is quite differentCaterpillar is essentially a construction equipment company that dabbles in farm equipment while Deere is a farm equipment company that also makes lawn and construction equipmen
tDespite their different focus, the companies revenue sources are nearly identical.In this dashboard, we analyze how revenues for Caterpillar and Deere have evolved over the last few years.
Caterpillar's revenues exceed Deere's by Almost 50% but Deere has grown at a faster pace over the recent years
Caterpillar is notably bigger than Deere. Caterpillar's total revenue in 2018 stood at $55 billion - almost 50% more than Deere's $37 billion.
However, Caterpillar has added roughly $7.7 billion to total revenue since 2015 at an average annual rate of 5.2%. On the other hand, Deere has been able to add roughly $8.5 billion to total revenues, growing at an average annual rate of 9%.
Strong commodity market fundamentals, robust demand from the Asia-Pacific region, higher demand levels for non-residential construction activities and increased demand for heavy construction, quarry and aggregate equipment have helped Caterpillar achieve strong revenue growth while higher shipment volumes and better price realization across segments have contributed to Deere's growth
Deere's revenue growth of 2.5% has marginally exceeded Caterpillar's revenue growth of 1.5% since 2015
Change in Caterpillar revenues
Change In Total Deere Revenue
Both companies have been able to achieve robust growth post 2016. Since 2016, Caterpillar has added $16. 1 billion-almost 50% more than Deere's revenue addition of $10.7 billion.Upbeat metal and energy prices coupled with strong demand for power generating products has led to a higher demand for Caterpillar’s products.On the other hand, Deere's Construction segment (which acquired Wirtgen in 2017) has been the largest contributor to its revenues . Moreover, supportive corn prices have boosted the demand for company's agricultural equipment.
Caterpillar's Operating Margin Has Shown Considerable Improvement Over The Last Couple Of Years
Caterpillar Operating Margin
Deere Operating Margin
Deere had reported an overall higher operating margin than Caterpillar. However, strong revenue growth coupled with expansion in the gross margin have helped Caterpillar's margin swell over the last couple of years.
As of 2018, Caterpillar's operating margin stood at 14.3% as opposed to Deere's 12%
Deere and Caterpillar's Largest Divisions Operate At Similar Margins
Construction Industries EBITDA margin
Agriculture and Turf Equipment Revenue EBITDA Margin
A Quick Look At Key Ratios Of Two Industrial Giants
Caterpillar's Higher Net Income Implies That CAT's Return on Assets (RoA) Figure Is Better
Return on assets = Net Income ÷ Average Total Assets
Caterpillar Return on Assets = [ A / B ]
Net Income [ A ]
Total Assets [ B ]
As of 2018, Caterpillar's return on assets stood at 7.8%-approximately 80% more to that of Deere's 4.4%
Deere Return on assets = [ C / D ]
Net Income [ C ]
Total Assets [ D ]
Notably, Caterpillar's net income of $6.1 billion was almost double to that of Deere's $3.1 billion
Caterpillar Has A Better Asset Turnover Ratio Than Deere
Asset Turnover Ratio = Revenue ÷ Average Total Asset
Caterpillar's asset turnover ratio of 0.7 is 40% higher than that for DE, signifying CAT is more efficiently using its assets.
Moreover, Caterpillar's Revenue Per Employee Nudges Ahead Of Deere's
Caterpillar Revenue Per Employee = [ A / B ] * 1000000
Caterpillar revenues [A]
Employees [ B ]
Caterpillar reported a headcount of 104K at the end of 2018, while Deere had 74K employees.
Caterpillar's Revenue per employee has increased by roughly 30% since 2016 while Deere reported an increase of 8%
Moreover, Caterpillar's revenue per employee in 2018 stood at $526K - roughly 5% higher than Deere's 505k.
Deere Revenue Per Employee = [ C / D ] * 1000000
Deere Revenues [ C ]
Employees [ D ]
However, Deere Enjoys A Higher Inventory Turnover Ratio Than CAT
Caterpillar Inventory Turnover Ratio = [ A / B ]
Cost of goods sold [ A ]
Inventory [ B ]
Inventory Turnover Ratio = Cost of goods sold ÷ Average Inventory
Deere's inventory turnover ratio of 4.2 is 30% higher than that for Caterpillar-signifying Deere is better managing its inventory.
Deere Inventory Turnover Ratio = [ C / D ]
Cost of goods sold [ C ]
Inventory [ D ]
However, this key metric for Deere has declined over the last couple of years while it has largely remained constant for Caterpillar
Comparing Deere's Market Capitalization To Caterpillar
Caterpillar Market Capitalization
Deere Market Capitalization
Comparing Deere's Current P/E Multiple To Caterpillar
Caterpillar P/E Multiple
Deere P/E Multiple
Conclusion: Caterpillar Is Larger And More Profitable
Caterpillar is clearly the bigger of the two companies and enjoys a much higher profitability than Deere.Moreover, Caterpillar is better utilizing its resources as evident from its higher return on assets and asset turnover ratios.Hence, it is no surprise that the market values Caterpillar higher than Deere. As of September 2019, Caterpillar's market valuation stood at more than $70 billion -almost 40% more than that of Deere's $52 billion.Trefis estimates that the fair value for Caterpillar is $90 billion, while that for Deere is $55 billion.Both the company target different markets and have strong fundamentals. Given their market outreach and strong operating metrics, we expect both Caterpillar and Deere to achieve steady growth in the coming years.
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