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Caterpillar Inc CAT

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Morningstar’s Analysis

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1-Star Price

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5-Star Price

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Economic Moat

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Capital Allocation

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U.S. Corporate Tax Rate Unlikely to Change After Roadblocks Rise in Senate

Julie Utterback, CFA Senior Equity Analyst

Analyst Note

| Julie Utterback, CFA |

Given recent political developments around the Build Back Better bill, we are reversing our forecast that the U.S. corporate tax rate will rise to 26% in 2022. We now believe the U.S. statutory tax rate will remain at 21% at least through President Joe Biden’s remaining term, which ends in early 2025. Our equity analysts will incorporate this new U.S. corporate tax rate assumption into their valuation models in the coming weeks. We previously simulated the impact of various tax rate changes on covered U.S. equities; reversing the statutory tax rate assumption to 21% results in a 3% average valuation increase, all else being equal.

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Company Profile

Business Description

Caterpillar is an iconic manufacturer of heavy equipment, power solutions, and locomotives. It is currently the world’s largest manufacturer of heavy equipment with over 15% market share in 2020. The company is divided into four reportable segments: construction industries, resource industries, energy and transportation, and Caterpillar Financial Services. Its products are available through a dealer network that covers the globe with over 2,000 branches maintained by 168 dealers. Caterpillar Financial Services provides retail financing for machinery and engines to its customers, in addition to wholesale financing for dealers, which increases the likelihood of Caterpillar product sales.

Contact
510 Lake Cook Road, Suite 100
Deerfield, IL, 60015
T +1 224 551-4000
Sector Industrials
Industry Farm & Heavy Construction Machinery
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 97,300

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