Real-time Financial Analysis for Caterpillar, Inc. (CAT) Vs. Deere (DE)

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Final Case Report
Executive Summary
The report provided here is a comparative financial analysis of Caterpillar and Deere & Company, which are some of the world’s biggest heavy-equipment manufacturers. In terms of capacity and profitability, Caterpillar outdoes Deere, as evidenced by its profit margins and financial ratios. Despite this being the case, a look at a decade long trend indicates that Deere has been enjoying higher growth rates. Thus, while Caterpillar has enjoyed more considerable revenues, Deere has been growing faster. To determine which firm is more suitable for investment purposes, a comprehensive analysis has been provided that includes a business strategy analysis, a financial analysis, a prospective analysis, an accounting analysis, and a recommendation for investment based on the risks and rewards. The business strategy analysis focuses on the business model for each company, including the strategies they employ. The financial analysis captures the past and current trends, which are analyzed using financial ratios. The prospective analysis summarizes the projected trends based on earnings per share and revenue growth estimates. The accounting analysis describes the accounting issues in relation to the two companies regarding the quality of reports and the soundness of the applicable policies. Lastly, the recommendation provides a personal view of the rewards or risks associated with an investment in Caterpillar over the short and long term. Based on the analysis, Caterpillar emerges as the more desirable company due to its capacity and potential for growth. Besides, its operating model is superior and best suited for an investment-oriented business. Thus, as an investor, although Deere has demonstrated steady growth in the past, its competitive position in the future is expected to be weaker than Caterpillar. The accounting analysis depicted some inconsistency between NASDAQ report figures and those of the companies. This prompts the companies to invest in corporate governance practices to ensure they produce quality financial reports.
Business Strategy Analysis
Caterpillar
Caterpillar’s corporate vision summarizes its business strategy as the global leader in customer value (Caterpillar Inc. Form 10-K, 2020). The company aims to achieve this by providing superior quality products to international clients that meet and exceed their expectations. While this is the primary goal, the firm also strives to grow its business profitability by investing heavily in areas with the most potential to create additional value. To accomplish this, Caterpillar applied the operating and execution model to identify business areas that consume or create the highest value (Caterpillar, 2022). The organization utilizes market data and information to analyze industries and identify the most profitable ones with the model. It then allocates resources to the most profitable areas and implements appropriate strategies to improve its competitive position in those areas. The adopted model not only functions as a framework for identifying valuable business for the company but also as a management strategy. In terms of management, the operating and execution model provides a framework through which the organization maximizes its assets. This implies that the firm ensures its assets operate at the fullest potential throughout and not only when the firm and the industry are at their peak performance. The model is considered one of the critical strategic elements of the company and is relied on to provide solutions that provide an avenue for growth in the future. 
Deere & Company
Much like Caterpillar, Deere and Company’s strategy is linked to the objective of unlocking new value for clients and enhancing the profitability and sustainability of the business. Technology is at the heart of its strategy, and the firm capitalizes on it to create value. Unlike Caterpillar, the organization uses an integrated enterprise business strategy (Deere & Company Form 10-K, 2021) that entails leveraging its various business segments (Deere & Company, 2022). Although agriculture and construction form the company’s core businesses, they are complemented by the forestry and turf businesses, where operations are maximized through high-performance teamwork. According to Fostolovych (2020), an integrated enterprise strategy is where multiple entities exist and operate collaboratively as if they were a single business unit. The strategy is mainly utilized in businesses that operate in advanced manufacturing, where firms must incorporate practical management tools relevant to manufacturing and integrate them with data. To Deere and Company, the approach entails interoperability of machines, applications and people to improve synergy throughout the organization. To interlink the three business segments, Deere uses IT-based systems to integrate them into a single system (Deree & Company Form 10-K, 2020). This allows all system applications to function simultaneously, eliminating the complexity associated with operating multiple businesses. As a result, the firm gains more visibility of the entire enterprise, mainly its business to business transactions. The integrated enterprise model provides the company with four key benefits; it enhances system interconnectivity, provides real-time updates on its operations, eases workflow through system automation, and improves productivity.  
Financial Analysis
The financial analysis provided in this section is based on data sourced from the U.S. Securities and Exchange Commission (SEC). Based on the companies’ form 10-K. Their financial performances had declined in the previous financial period, although revenues are reported to have increased in 2021. The pandemic is cited as the leading cause of the decline due to its effect on product demand. Besides affecting demand, the pandemic affected the global capital markets, which directly impacted Caterpillar and Deere & Company alike. Besides, the value of the equipment (both purchased or leased) declines as a result. Moreover, market volatility affected product and service prices, which affected the firm’s revenue for the period. However, following the recovery from the pandemic, the firms increased their revenue. Compared to other players in the industry, the companies managed to grow their sales and net income at a relatively higher pace. 
An analysis of the companies based on the quick ratio indicates an improvement in their financial performance. Comparing the ratio figures for the period ended 2020 and 2021 shows a significant improvement from 0.97 to 1.15 for Caterpillar. This implies that the company’s liquidity has improved with more quick assets that can be converted into cash quickly. This improvement was in part due to the financial impact of the equipment returned or repossessed. Based on the same ratio, the analysis of Deere & Company also indicates an improvement from a ratio of 1.8 for the period ended October 2020 to 1.91 in 2021. In order to determine the ability of the two organizations to generate revenue, the net profit margin ratio is applied. For Caterpillar, the value of this ratio for 2020 was 7.18%, while in 2021, it was 12.73%. Deere’s figures for the two periods were 7.74 % and 13.54%, respectively. The increase indicates the improved efficiency in operating and generating revenue. Financially, the ratios suggest that both Caterpillar and Deere & Company are excelling in pricing their products and services and their costs. Looking at the market trends, the improvement is primarily due to a strong rebound in demand for agricultural and construction equipment.  
Prospective Analysis
Both Caterpillar and Deere & Company have shown incredible improvements, considering how the pandemic affected their respective businesses. The recovery has been impeccable, considering that both had suffered declining profits following a rapid decrease in demand for their products and falling prices for their products and services. The trend in the first quarter of 2022 is that both companies have enjoyed increasing sales, particularly Caterpillar, which has been noted to have significant revenues topping the heavy-equipment makers on Wall Street (Flowers & Sampath, 202...