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 Fool.com 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.
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