Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Should We Avoid Caterpillar Inc. (CAT) Now?

Joy Global Inc. (NYSE:JOY) is the cheapest among the three. At $50.90 per share, Joy Global is worth $5.4 billion on the market. The market values Joy Global at 5.13 times its trailing EBITDA. Joy Global focuses its business mainly on Mining Machinery and Equipment, generating more than $5.66 billion in revenue and $1.1 billion in operating income. Thus, Joy Global is expected to get hit hard when global mining capital expenditures fall off the cliff. Joy Global also has a huge amount of goodwill and intangible assets, representing as much as 68.8% of its total equity.

Deere & Company (NYSE:DE) has the highest valuation among the three companies. It is trading at $83.60 per share with a total market cap of $32.44 billion. It has the highest EBITDA multiple at 10.16. Deere also seems to be the safest because of its least exposure to the global mining industry. Most of its revenue, $27.12 billion, or nearly 81% of the total revenue, was generated from the Agriculture and Turf segment.

This segment was also the largest profit contributor, with more than $3.92 billion in operating income in 2012. For the full year, the company expects that equipment sales growth would be around 6% while net income might come in at $3.3 billion.

My Foolish take

Caterpillar and Joy Global, with a significant exposure to declining global mining capital expenditures, would experience a lot of headwinds in the near future. Moreover, their high levels of goodwill and intangible assets are quite vulnerable to any future write-downs. Jim Chanos mentioned that Caterpillar is a great company, but it is levered to the wrong products at the wrong time.

The article Should We Avoid Caterpillar Now? originally appeared on and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.