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Investors are looking for stocks that going to be among the first
to participate in the recovery of the economy. Some of the early
signs that the light at the end of the tunnel is getting brighter
is when we see heavy machinery company's grow revenue and
Let's take a look at three of the top heavy machinery companies in
the world. We will start with industrial machine and heavy
vehicle company Caterpillar Inc. Then we will head to the farm
and look at how Deere has done lately and we can wrap things up
with Titan Machinery.
Caterpillar Inc. (CAT - Analyst Report) manufactures and
sells construction and mining equipment, diesel and natural gas
engines, industrial gas turbines and diesel-electric locomotives
worldwide. It big machinery for big business and it has the
revenues to prove it.
Caterpillar Inc. had revenues of more than $60 billion in 2011, up
41% from the $42.5 billion in 2010. The 2010 revenue was also a
healthy increase of 31% from the 2009 depressed revenue number of
$32.4 billion which was 37% lower than the 2008 level due to the
Over the last several quarters, CAT has seen an excellent pattern
of increasing earnings. Just as important as increasing estimates
is the idea of not disappointing Wall Street. In six of the last
seven quarter, CAT has topped the Zacks Consensus Estimate by an
average of 18%. Those beats, however, did not translate into big
moves for the stock, or at least on the day immediately following
the report. The average move in the stock price was a loss of
less than one quarter of one percent.
It should also be noted that CAT pays a $0.46 per share quarterly
dividend. That works out to be about 1.75% yield on the stock.
The company also has shown a pattern of increasing its dividend,
with payment of $0.42 per quarter in 2009 increasing in July of
2010 to $0.44 per quarter and up to the current level in July of
The increase in earnings, higher earnings estimates and consistent
beats makes Caterpillar Inc. a Zacks #1 Rank (Strong Buy).
Deere (DE - Analyst Report) provides products
and services primarily for agriculture and forestry worldwide. Its
Agriculture and Turf segment manufactures and distributes a line
of farm and turf equipment and related service parts, which
include large, medium, and utility tractors, loaders, combines,
corn pickers, cotton and sugarcane harvesters, and related
Deere is also one the bigger companies in the heavy machinery
segment, and its too has massive revenues. $32 billion in 2011
sales were 23% ahead of the $26 billion the company posted in
2010. The company also saw growth of 13% in 2010, due to the
depressed revenues in the global recession of 2009.
Earnings growth is a different story for DE as opposed to CAT.
The last three quarters have seen consecutive negative earnings
growth, something investors usually don't want to see. The chart
below really tells the story of why the stock is lower by more
than 15% over the past year. Lower earnings almost always
translates into lower stock prices.
Like CAT, DE pays a dividend of $0.46 per share, but because of
the lower stock price, the yield is slightly higher at 2.25%. The
company also has a history of increasing the dividend, but not
with a discernible pattern. Deere paid quarterly dividends of
$0.28 for eight quarters before bumping it up to $0.30 in 2010 for
two quarters and then to $0.35 for two more quarters. The three
previous quarters saw a dividend of $0.41 per share.
While Deere has not reported below the Zacks Consensus Estimate,
it has seen lower earnings and lower earnings estimates. This has
contributed to the Zacks #3 Rank (Hold).
Titan Machinery (TITN - Snapshot Report) is the
smallest company of this group, but sometime being nimble can be a
big benefit. TITN was recently written up as a Value Rank Buy.
Unlike its much larger counterparts, TITN saw revenue growth
despite the global recession in 2009. That should make some take
notice, but the story keeps getting better as its growth rate has
increased in each of the last three years. Revenues are still
relatively low in comparison at $1.6 billion for 2011, but that
was 52% ahead of the 2010 level of $1.1 billion.
The earnings picture for TITN is a little different than what we
saw in CAT and in DE. With the last two quarters showing
impressive growth, the consistency aspect that CAT has is not
here. The growth however has translated into an impressive run
for the stock price. Over the last six months the stock has moved
higher by more than 50% easily making it the best performer of the
Due to the higher earnings and the pattern of strong earnings
surprises, Titan Machinery is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist
Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor
service You can follow him at twitter.com/bbolan1