Caterpillar ( NYSE: CAT ) manufactures heavy-duty vehicles and technologies designed for constructing buildings and mining the earth. Worldwide, Caterpillar is the leading manufacturer, by revenue, of engines and turbines used in machinery, electric generators, highway and non-highway trucks, and seaborne vessels.
During recent years, CAT has relied primarily on demand for infrastructure in emerging markets for revenue growth. The company has increased in presence in several key regions such as China, which has seen unprecedented wealth growth and has a huge appetite for energy. Though dependent on the declining US housing construction market, Caterpillar has diversified its sales internationally, aided by the global boom in infrastructure development. Its largest distributor is the Canadian company Finning International (FTT) .
With nearly 95,000 employees, Caterpillar's global footprint spans six continents and boasts the highest worldwide sales of its competitors. In addition to manufacturing and selling machines and engines, Caterpillar also provides financial products to its customers. Its three main businesses generated $7.5 billion in 2010, but have been hit hard by a collapse in commodity prices.
The company has 3 primary segments: Machinery, Engines, and Financial Products. In 2008, Machinery and Engines accounted for 88% of the company's profit. Financial Products accounted for 12%.
Machinery: the design, manufacture, marketing and sales of construction, mining and forestry machinery—track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders and related parts. Also includes logistics services for other companies and the design, manufacture, remanufacture, maintenance and services of rail-related products.
Engines: The design, manufacture, marketing and sales of engines for Caterpillar machinery; electric power generation systems; on-highway vehicles and locomotives; marine, petroleum, construction, industrial, agricultural and other applications; and related parts. Also includes remanufacturing of Caterpillar engines and a variety of Caterpillar machine and engine components and remanufacturing services for other companies.
Financial Products: Cat Financial provides a wide range of financing alternatives to customers and dealers for Caterpillar machinery and engines, Solar gas turbines as well as other equipment and marine vessels. Cat Financial also extends loans to customers and dealers. Cat Insurance provides various forms of insurance to customers and dealers to help support the purchase and lease of our equipment. Cat Power Ventures is an investor in independent power projects using Caterpillar power generation equipment and services. 
Caterpillar announced revenues of $640 million for the first quarter of 2011, a 1% improvement from revenues posted in the first quarter of 2010 which totaled $631 million. Profit increased by $30 million for the quarter, totaling $83 million after tax for Q1. Profits for the first quarter of last year were $53 million; this marks a 57% increase in profits between Q1 FY 2011 and Q1 FY 2010. Total assets remained approximately constant between the two years. In 2011, total assets equaled $29.380 billion compared to $29.450 million for the first quarter of 2010. Gains in revenues were driven primarily by $24 million in earnings from the repossession of capital.
Caterpillar announces revenues of $42.6 billion for the 2010 fiscal year, a 31% increase from $32.4 billion in 2009. Profit similarly increased in 2010 to $2.7 billion, up from $895 million in 2009. Fourth quarter revenues and profits were also up when compared to year-ago results. Revenue for the fourth quarter was $12.8 billion, an increase of 62% from fourth quarter earnings in 2009. Fourth quarter profits were up by 317%, totaling $968 million, an increase from $232 million in the fourth quarter of 2009. Increased demand, production, and efficiency drove these gains.
Caterpillar's agricultural equipment sector will prosper if the nation has to harvest massive amounts of corn or soybeans to fuel its vehicles. It takes about 21 pounds of corn to make 1 gallon of ethanol, which would mean much more demand for Caterpillar's tractors if corn based ethanol took off.
And the biofuel trend might miss the point. New research done at UC Merced and published in the journal Science in May 2009 presents evidence that crops yield 81% more energy per unit area of land when it is burned to make electricity to power cars than when it is refined into ethanol. Furthermore, greenhouse gas emissions from this "bioelectricity" are 100% lower per unit area of land than cellulosic ethanol. Certainly, Caterpillar would benefit from a switch to corn-based power, but not as much if that power does not require the excessive harvests that ethanol does.
Rapid growth of Emerging Markets like Mexico, China and India all could benefit Caterpillar, which has distribution networks to provide worldwide industrialization projects with equipment. More than half of Caterpillar's revenue is international, and that number is increasing.
From an economic perspective, machinery has a higher marginal utility in places where it is underutilized. If a town has no tractors, 1 more tractor is far more significant than it would be for a town that already has 80 tractors. Thus, Caterpillar equipment will drive more value in developing markets. Look out for the stability of these markets, as their continued development bodes well for Caterpillar's business. Of course, political change, terrorism, and corruption are also risks worth following because they are associated with the governments of most developing countries.
The US Subprime lending crisis led to a decline in home values which undermined Caterpillar's consumer facing equipment sales. Real Estate Developers simply do not need to buy new equipment to build new neighborhoods- they need to worry about their tanking investments. To monitor the performance of the US real estate market follow the IShares Dow Jones U.S. Real Estate Index Fund (IYR). It is down over 30% since July 2008 and is showing no immediate sign of recovery.
Caterpillar (CAT) plays in the large-cap, international Construction, Agriculture and Machinery Industry. Other companies include Deere & Company (DE), Kubota (KUB), Fastenal Company (FAST), Joy Global (JOYG), and CNH Global N.V. (CNH).
Caterpillar is the 800 pound guerilla in its space, with its annual net income exceeding that of its next 4 major competitors. But despite its huge size, Caterpillar has underperformed its peers for the last 5 years, still riding the momentum of decades of performance.
Its competitors have regional strength, because geography in the heavy machinery business matters (shipping cranes is never cheap). Komatsu, for instance, competes with Caterpillar strongly in Japan. Additionally, many international competitors have lower labor costs because Caterpillar (CAT)'s US employees demand higher wages for their work.
Caterpillar competes in several different markets, where it tends to dominate. The following charts show you how Caterpillar does relative to AGCO (AG), FIAT S.p.A. (F-MI), Kubota (KUB), Deere & Company (DE),CNH Global N.V. (CNH), and Terex (TEX) which are its primary public competitors.