CAT – Market expectations are for continued Uniform ROA recovery, but management has concerns about their profitability and growth levels, RI and E&T margins, and order rates

• Caterpillar Inc. (CAT:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with an 18.6x Uniform P/E. However, even at these levels, the market has bullish expectations for the firm, while management may have concerns about their profitability and growth levels, RI and E&T margin volatility, and their order rates and backlog
• Specifically, management may lack confidence in their ability to maintain historically high profit per share levels, and to sustain strong operational performance. In addition, they may be concerned about their ability to drive both top and bottom line growth in FY 2019, and to minimize cost headwinds. Also, they may be concerned about areas of weakness in their Construction Industries (CI) business in EAME and Latin America, and about margin volatility in their Resource Industries (RI) and Energy & Transportation (E&T) segments. Additionally, they may have concerns about their ability to find the right amount of leverage, and to expand both their market share and margins. Finally, they may lack confidence in the sustainability of strong order rates and backlog, and in their ability to manage their inventory build