NEW YORK (TheStreet) -- Caterpillar (CAT) - Get Report shares are up by 1.90% to $76.75 in mid-morning trading on Tuesday, after the construction and mining equipment maker announced that it would be manufacturing its own dump trucks, ending its outsourcing deal with Navistar International (NAV) - Get Report.
The two companies began producing and collaborating on the design and build of the vehicles in 2011, launching three different models during their four year partnership.
"We appreciate the collaboration we have had with Navistar. As we look to future launches of new truck models, this updated strategy will better position us to help provide our customers with the best products and services for this market. Caterpillar continues to drive the design phase of all models, both current and planned," Caterpillar's director of the Global On-Highway Truck Group Chris Chadwick said in a statement.
The company said that the transition will begin immediately with production expected to start in the first half of next year.
The trucks are currently manufactured in Escobedo, Mexico but operations will be moved to a plant in Victoria, TX.
"The continued strength of our balance sheet and strong cash flow allow us to return capital to stockholders despite weakness in the cyclical industries we serve," said CEO Doug Oberhelman. "Repurchasing an additional $1.5 billion of Caterpillar stock in the third quarter of 2015 will bring our total 2015 stock repurchases to approximately $2 billion."
Separately, TheStreet Ratings team rates CATERPILLAR INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate CATERPILLAR INC (CAT) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins and notable return on equity. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 35.04% is the gross profit margin for CATERPILLAR INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 5.76% trails the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Machinery industry and the overall market on the basis of return on equity, CATERPILLAR INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 15.4%. Since the same quarter one year prior, revenues fell by 12.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CATERPILLAR INC's earnings per share declined by 26.1% in the most recent quarter compared to 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 $5.87 versus $5.75 in the prior year. For the next year, the market is expecting a contraction of 14.9% in earnings ($5.00 versus $5.87).
- You can view the full analysis from the report here: CAT Ratings Report