Industrials Stock Pitch Caterpillar (CAT) Danaher Corporation

Report
Vishal Korlipara
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Sorry for the extra company…. It won’t take
any longer
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Manufacturer of construction and mining equipment, diesel and natural gas
engines, and industrial gas turbines. The company is one of the few leading U.S.
companies in an industry that competes globally from a principally domestic
manufacturing base
Their Earnings Release is on this Thursday (1/26/2012) and investors seem bullish
on this company
Undisputed leader in terms of revenue in industries such as construction
The company will be a prime beneficiary of increased domestic and international
spending
Dividend= 1.7% Market Cap= $68.73 Billion
Sales in 2012 are expected to rise upwards of 20% and 80% of dealers in 2011
beat expectations by 10% at a minimum
Potential Downside:
Deere’s expansion might inhibit CAT’s demand in the foreign markets especially
Singapore.
Caterpillar’s sales into the mining and oil and gas industries are highly dependent
on the commodity markets where price and consumption trends drive
investment
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Global conglomerate that designs, manufactures, and markets diverse lines of
industrial and consumer products with five strategic platforms
Water and medical/dental platforms represent roughly 45% of the total revenue,
and offer low-to-mid single-digit revenue growth
Strong balance sheet and strong FCF generation
The Danaher Business System (DBS) provides the Company a competitive
advantage through process improvement, enhanced cash flow, and reduced
cycle time
Management’s effort to make DHR’s business portfolio more diversified and less
cyclical has reduced volatility
control of capital efficiency allowed the company to invest $750 million during
the 2009 downturn in growth and to further remove structural costs
Acquisition of Beckman Coulter is furthering their ability for growth
Dividend= 0.20% Market Cap= $36.24B Earnings Release= January 31
Potential Downside:
Being able to properly integrate their new acquisitions
Stretching too far?
Possible inability to deliver operating improvements
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ROP has grown its revenues, EBITDA, and EPS annually, driven by a mix of
internal growth and acquisitions
ROP’s recent strategy: to deploy excess cash flow into secular growth businesses
such as analytical instrumentation, Neptune, and Transcore
Positioned for Higher Growth: ROP has a proven record of acquiring niche,
specialty engineered product businesses with solid growth opportunities, high
margins, and strong free cash flow
TransCore is winning nearly all project bids with its next-generation eGo+
battery-free sticker tag
Neptune is a market leader that continues to gain shares with the rapid adoption
of its new RF integrated water meter
Dividend=0.60% Market Cap= $9.17B
Earnings Release= February 2
Potential Downside:
The process control industry is highly competitive and competitors often target
market share at the expense of margins thus could impact revenues and earnings
in order to stay competitive
The company derives ~20% of its revenue from the oil and gas industry, which
makes it vulnerable during a downturn in these markets
Global provider of technology products and services to the
building systems and aerospace industries
 Solid balance sheet and strong free cash flow are expected to
support future acquisitions and provide financial flexibility
 Construction activity in North America expected to drive demand
for Carrier products
 Acquisition of Linde and Kidde could “underpin” above-industry
growth
 Dividend= 2.50% Market Cap= $ 70.48B
 Earnings Release is …. Tomorrow.
Potential Downside:
 Extended weakness in commercial aerospace is hurting related
businesses
 Commodity cost increases may put margin pressure on Carrier
 Rising commodity prices particularly of copper and steel adversely
affecting earnings
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