Operating Margin - Caterpillar Inc (NYSE:CAT)

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Price: 597.36 USD -0.96%

Market Cap: 279.6B USD

19.7%

Current

20%

Average

6.5%

Industry

Operating Margin represents how efficiently a company is able to generate profit through its core operations.

Higher ratios are generally better, illustrating the company is efficient in its operations and is good at turning sales into profits.

Operating Margin

19.7%

Operating Profit

12.8B

Revenue

64.7B

Operating Margin Across Competitors

Country	Company	Market Cap	Operating Margin
US	Caterpillar Inc NYSE:CAT	280.6B USD	20%
US	Cummins Inc NYSE:CMI	70.9B USD	12%
SE	Volvo AB STO:VOLV B	603.9B SEK	11%
US	Paccar Inc NASDAQ:PCAR	58.2B USD	14%
US	Westinghouse Air Brake Technologies Corp NYSE:WAB	36.8B USD	17%
CN	China CSSC Holdings Ltd SSE:600150	253.9B CNY	5%
DE	Daimler Truck Holding AG XETRA:DTG	29.6B EUR	6%
JP	Toyota Industries Corp TSE:6201	5.2T JPY	3%
KR	Hyundai Heavy Industries Co Ltd KRX:329180	48.2T KRW	9%
JP	Komatsu Ltd TSE:6301	4.6T JPY	16%
CN	CRRC Corp Ltd SSE:601766	202.6B CNY	7%

Caterpillar Inc
Glance View

Economic Moat

Wide

Market Cap

279.9B USD

Industry

Machinery

Caterpillar Inc. has a storied history embedded within the rugged landscapes and bustling urban environments powered by its machines. Born out of the merger between the Holt Manufacturing Company and the C. L. Best Tractor Company in 1925, Caterpillar has since played a crucial role in advancing construction, mining, agriculture, and forestry industries across the globe. Known universally by its striking yellow machinery, the company's core operations revolve around designing, manufacturing, and selling construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. These pieces of heavy machinery are the backbone of numerous industries that build and maintain essential infrastructure, from roads and bridges to power plants and vast mining operations. Caterpillar's business model is layered with multiple revenue streams, anchored by the sale and leasing of new equipment, the provision of financial services, and the lucrative aftermarket parts and services segment. While the initial sale of equipment generates a significant portion of its revenue, the long-term sustainability comes from servicing these products, ensuring they remain operational in the field for many years. Through its financing arm, Caterpillar Financial Services, the company facilitates the acquisition of its heavy machinery, providing leasing and financial products that enhance client relationships and ensure steady revenue circulation. By integrating technology into its operations, Caterpillar also harnesses data analytics through its fleet management offerings, enhancing efficiency and providing clients with insightful operational data. This holistic approach not only underpins a strong competitive advantage but also solidifies Caterpillar’s reputation as a linchpin in the machinery sector.

View CAT Analysis

CAT Intrinsic Value

What is Intrinsic Value?

Economic Moat is a concept popularized by Warren Buffett to describe a company's durable competitive advantage. It represents the 'moat' that protects a company from competitors and helps it sustain profitability over the long term. Our analysis of the past 10 years showed that companies with a wide economic moat significantly outperformed the market, delivering +645% returns compared to +189% for the S&P 500.

Our research into Economic Moat performance spans the past 10 years and focuses on companies with a wide economic moat. For this analysis, we calculated the average stock price returns of these companies, comparing them to the performance of the S&P 500 index over the same period.

The results were compelling: wide moat stocks achieved a remarkable +645% average return, compared to +188% for the broader market. This difference highlights the long-term benefits of investing in businesses that can maintain their market position and pricing power over time.

Note: This research does not account for survivorship bias. Past performance is not indicative of future results.

Determining whether a company has an economic moat requires both a deep dive into financial metrics and a qualitative assessment of its competitive position. Our analysts conduct a rigorous evaluation that focuses on identifying structural advantages that enable a company to sustain profitability and defend its market share over the long term.

The process begins with an analysis of a company’s historical financial performance. We assess how consistently the company has generated returns above its cost of capital and whether those returns have been stable or improving. However, financial performance alone doesn’t reveal the full picture. To understand the sources of these advantages, we evaluate five key drivers of economic moats:

Network Effect: We analyze whether the value of a company’s product or service grows as its user base expands. Platforms like payment systems or marketplaces benefit from this self-reinforcing.

Switching Costs: We assess whether customers face significant costs or disruptions when switching to a competitor’s product or service. High switching costs create customer stickiness and provide pricing power.

Intangible Assets: Strong brands, patents, and regulatory licenses can protect a company’s market position by creating barriers for competitors or enabling premium pricing. For example, a well-recognized consumer brand may command higher customer loyalty and margins.

Efficient scale: Occurs when a market is optimally served by one or a few players, making it unprofitable for new entrants to compete. This typically happens in industries with high fixed costs or geographic constraints, such as utilities or pipelines.

Cost Advantage: Companies with structural cost advantages can produce goods or services at a lower cost than their competitors, enabling them to offer competitive pricing or maintain higher margins. These advantages often arise from economies of scale, superior supply chain management, or proprietary technology. Firms like Walmart leverage their massive scale to negotiate better terms with suppliers, allowing them to undercut competitors on price.

By examining these factors in combination with a company’s financial performance and market positioning, we classify each company into one of three categories:

This rigorous evaluation ensures that our moat ratings are both comprehensive and reliable, giving investors the tools they need to make well-informed, long-term decisions.

The AI Assistant may sometimes provide inaccurate information.

Make your own investment decisions or consult a licensed financial advisor.

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Caterpillar Inc
NYSE:CAT