Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.NEW YORK (TheStreet) -- Caterpillar (NYSE:CAT) has been reiterated by TheStreet Ratings as a buy with a ratings score of B. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Net operating cash flow has increased to $1,979.00 million or 32.37% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 17.07%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.6%. Since the same quarter one year prior, revenues slightly dropped by 6.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Machinery industry and the overall market, CATERPILLAR INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- CATERPILLAR INC has exprienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CATERPILLAR INC increased its bottom line by earning $8.49 versus $7.39 in the prior year. For the next year, the market is expecting a contraction of 6.0% in earnings ($7.98 versus $8.49).
- The share price of CATERPILLAR INC has not done very well: it is down 20.36% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
--Written by a member of TheStreet Ratings Staff.Exclusive Offer: Jim Cramer's 'go-to' small/mid-cap guru Bryan Ashenberg only buys stocks he thinks could return 50-100%. See his top picks for 14-days FREE.
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