Caterpillar (NYSE:CAT) and Westinghouse Air Brake Technologies (NYSE:WAB) are both large-cap industrial products companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, valuation, dividends, profitability, analyst recommendations, institutional ownership and risk.
Earnings and Valuation
This table compares Caterpillar and Westinghouse Air Brake Technologies' top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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Caterpillar | $53.80 billion | 2.23 | $6.09 billion | $11.06 | 19.91 |
Westinghouse Air Brake Technologies | $8.20 billion | 1.72 | $326.70 million | $4.17 | 17.88 |
Caterpillar has higher revenue and earnings than Westinghouse Air Brake Technologies. Westinghouse Air Brake Technologies is trading at a lower price-to-earnings ratio than Caterpillar, indicating that it is currently the more affordable of the two stocks.
Insider & Institutional Ownership
67.5% of Caterpillar shares are held by institutional investors. Comparatively, 88.1% of Westinghouse Air Brake Technologies shares are held by institutional investors. 0.3% of Caterpillar shares are held by insiders. Comparatively, 5.4% of Westinghouse Air Brake Technologies shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.
Dividends
Caterpillar pays an annual dividend of $4.12 per share and has a dividend yield of 1.9%. Westinghouse Air Brake Technologies pays an annual dividend of $0.48 per share and has a dividend yield of 0.6%. Caterpillar pays out 37.3% of its earnings in the form of a dividend. Westinghouse Air Brake Technologies pays out 11.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Caterpillar has raised its dividend for 28 consecutive years and Westinghouse Air Brake Technologies has raised its dividend for 1 consecutive years. Caterpillar is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Risk & Volatility
Caterpillar has a beta of 0.97, suggesting that its stock price is 3% less volatile than the S&P 500. Comparatively, Westinghouse Air Brake Technologies has a beta of 1.53, suggesting that its stock price is 53% more volatile than the S&P 500.
Analyst Recommendations
This is a breakdown of current ratings and price targets for Caterpillar and Westinghouse Air Brake Technologies, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Caterpillar | 3 | 12 | 11 | 0 | 2.31 |
Westinghouse Air Brake Technologies | 0 | 2 | 6 | 0 | 2.75 |
Caterpillar currently has a consensus target price of $177.7895, indicating a potential downside of 19.25%. Westinghouse Air Brake Technologies has a consensus target price of $82.8571, indicating a potential upside of 11.10%. Given Westinghouse Air Brake Technologies' stronger consensus rating and higher possible upside, analysts clearly believe Westinghouse Air Brake Technologies is more favorable than Caterpillar.
Profitability
This table compares Caterpillar and Westinghouse Air Brake Technologies' net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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Caterpillar | 7.60% | 25.24% | 4.73% |
Westinghouse Air Brake Technologies | 5.29% | 7.60% | 3.99% |
Summary
Caterpillar beats Westinghouse Air Brake Technologies on 11 of the 17 factors compared between the two stocks.