How Important Is North America To Caterpillar’s Stock?

by Trefis Team
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North America is the biggest segment for Caterpillar (NYSE: CAT) and it contributes nearly half  of Caterpillar’s Revenues. While sales for the company in North America have grown at over 20% in 2017 and 2018, we expect growth to be in the low-single digit range for 2019-20. Over the last three years revenue growth in North America was similar to the company’s overall revenue growth with Caterpillar’s North America revenue witnessing a trend identical to peers John Deere, Cummins and GE. Trefis details the importance of its North America to Caterpillar in an interactive dashboard, parts of which are highlighted below.

 

An Overview of Trends in  Caterpillar’s Revenues

Caterpillar’s Revenues increased by 20.4% from $45.5 billion in 2017 to $54.7 billion in 2018. Trefis estimates that the figure should have shrunk marginally to $54.6 billion in 2019, and will only see marginal growth to reach $54.8 billion in 2020.

  • Caterpillar’s revenue growth was exceptionally strong in 2017 & 2018 on account of higher demand of oil & gas activities which led to an increase in pipeline construction and also boosted the demand for well servicing and gas compression.
  • Sales were also high in the Asia/Pacific region (most significantly in China), stemming from increased building construction and infrastructure investment, and an increase in mining production and commodity prices which resulted into higher sales of heavy construction, quarry and aggregate equipment.
  • There was also an increase in the transportation sales due to higher rail services from acquisitions and increased rail traffic.
  • North America Revenue increased by 21.6% from $21.1 billion in 2017 to $25.6 billion in 2018. North America Segment is expected to have a generated $25.5 billion in 2019.
  • Caterpillar’s International Revenue increased by 19.3% from $24.4 billion in 2017 to $29.1 billion in 2018. It’s International Operations are expected to have a revenue of $19.7 billion in 2019.

 

How has Caterpillar’s North America Revenue fared with respect to its Peers?

  • Caterpillar’s North America revenue contributed the highest revenue in the past 2 years and is expected to do so again in 2019. Contribution to Total Revenue was 46.4% in 2017 and 46.8% in 2018.
  • Trefis estimates it will hover in the same range for 2019 and 2020.

Additional details about how trends in Caterpillar’s revenues compare with peers John Deere, Cummins and GE are available in our interactive dashboard.

 

How does revenue mix of North America compare with the overall revenue mix.

  • Energy & Transport segment forms a bigger part of the revenue mix of North America compared to the overall revenue mix.
  • This is on account of higher sales in North America on account of increase in the transportation sales due to higher rail services from acquisitions and increased rail traffic.

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