All trends are Stable. The rating confirmations are based on DBRS Morningstar's expectations that CAT will carry forward its solid operating momentum from 2022 with revenues and margins increasing primarily because of favourable price realization and higher sales volume. The Stable trends reflect DBRS Morningstar's expectation that operating results and credit metrics will remain strongly supportive of the current rating category in the near to medium term.
The ratings continue to be underpinned by CAT's robust business profile as the leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. The Company's strong technological capabilities, superior product quality, and world-class manufacturing operations also lend support to its leading market position and strong brand recognition. Additionally, the Company's captive finance subsidiary and large global network of independent dealers provide intensive geographic coverage and strong customer relationships. New services growth opportunities and long-term energy transition trends also reflect positively on the business risk profile. These factors are balanced by the Company's inherent exposure to deeply cyclical industries and volatile input prices.
Looking ahead, DBRS Morningstar believes CAT's earnings profile will continue to remain well situated for the current 'A' rating. DBRS Morningstar forecasts Machinery, Energy & Transportation (ME&T) revenues to rise to more than
DBRS Morningstar expects CAT's financial profile to remain strong and add to the rating strength. ME&T cash flow from operations (as defined by DBRS Morningstar) should remain above
DBRS Morningstar expects CAT's ratings to remain stable in the short to medium term because of its strong credit profile, which includes projected financial risk metrics that are commensurate with the current ratings. Despite the Company's continued exposure to inherently cyclical end sectors, a positive rating action could result if CAT demonstrates a material strengthening of the business risk profile which leads to lower volatility of operating and credit metrics through the cycle. Conversely, although unlikely, should CAT's business risk profile suffer materially, owing to a particularly sharp and sustained decline in demand from the Company's key destination sectors, a negative rating action could result.
ESG CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at (
Notes:
All figures are in
DBRS Morningstar applied the following principal methodology:
Global Methodology for Rating Companies in the Industrial Products Industry (
The following methodologies have also been applied:
DBRS Morningstar Global Criteria: Guarantees and Other Forms of Support (
DBRS Morningstar Global Criteria: Commercial Paper Liquidity Support for Nonbank Issuers (
The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorning-star.com/about/methodologies.
A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions.
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.
The rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the rating process for this rating action.
DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This is a solicited credit rating.
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.
DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrsmorningstar.com.
Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
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