Head-To-Head Contrast: Kadant (NYSE:KAI) and Caterpillar (NYSE:CAT)

Caterpillar (NYSE:CAT) and Kadant (NYSE:KAI) are both industrials companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, institutional ownership, profitability and risk.

Earnings & Valuation

This table compares Caterpillar and Kadant”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Caterpillar	$67.59 billion	4.07	$8.88 billion	$25.49	23.47
Kadant	$1.05 billion	3.41	$101.97 million	$9.91	30.65

Caterpillar has higher revenue and earnings than Kadant. Caterpillar is trading at a lower price-to-earnings ratio than Kadant, indicating that it is currently the more affordable of the two stocks.

Dividends

Caterpillar pays an annual dividend of $6.52 per share and has a dividend yield of 1.1%. Kadant pays an annual dividend of $1.44 per share and has a dividend yield of 0.5%. Caterpillar pays out 25.6% of its earnings in the form of a dividend. Kadant pays out 14.5% 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 increased its dividend for 30 consecutive years and Kadant has increased its dividend for 12 consecutive years. Caterpillar is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Caterpillar and Kadant, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Caterpillar	0	12	15	0	2.56
Kadant	0	3	1	0	2.25

Caterpillar presently has a consensus price target of $898.25, suggesting a potential upside of 50.12%. Kadant has a consensus price target of $357.50, suggesting a potential upside of 17.71%. Given Caterpillar’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Caterpillar is more favorable than Kadant.

Institutional and Insider Ownership

71.0% of Caterpillar shares are held by institutional investors. Comparatively, 96.1% of Kadant shares are held by institutional investors. 0.3% of Caterpillar shares are held by insiders. Comparatively, 1.3% of Kadant shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk and Volatility

Caterpillar has a beta of 1.65, suggesting that its share price is 65% more volatile than the S&P 500. Comparatively, Kadant has a beta of 1.19, suggesting that its share price is 19% more volatile than the S&P 500.

Profitability

This table compares Caterpillar and Kadant’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Caterpillar	15.21%	59.87%	11.99%
Kadant	9.81%	14.05%	8.00%

Summary

Caterpillar beats Kadant on 13 of the 17 factors compared between the two stocks.

About Caterpillar

Caterpillar Inc. manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives in worldwide. Its Construction Industries segment offers asphalt pavers, compactors, road reclaimers, forestry machines, cold planers, material handlers, track-type tractors, excavators, telehandlers, motor graders, and pipelayers; compact track, wheel, track-type, backhoe, and skid steer loaders; and related parts and tools. The company's Resource Industries segment provides electric rope and hydraulic shovels, draglines, rotary drills, hard rock vehicles, tractors, mining trucks, wheel loaders, off-highway and articulated trucks, wheel tractor scrapers and dozers, fleet management products, landfill and soil compactors, machinery components, autonomous ready vehicles and solutions, work tools, and safety services and mining performance solutions, as well as related parts and services. Its Energy & Transportation segment offers reciprocating engine powered generator sets; reciprocating engines, drivetrain, and integrated systems and solutions; turbines, centrifugal gas compressors, and related services; and diesel-electric locomotives and components, and other rail-related products. The company's Financial Products segment provides operating and finance leases, installment sale contracts, revolving charge accounts, repair/rebuild financing services, working capital loans, and wholesale financing; and insurance and risk management products and services. Its All Other Operating segment offers filters and fluids, undercarriage, ground engaging tools, fluid transfer products, precision seals, and rubber sealing and connecting components; parts distribution; logistics solutions and distribution services; brand management and marketing strategy services; and digital investments services. Caterpillar Inc. was founded in 1925 and is headquartered in Irving, Texas.

About Kadant

Kadant Inc. supplies technologies and engineered systems worldwide. It operates in three segments: Flow Control, Industrial Processing, and Material Handling. The Flow Control segment develops, manufactures, and markets fluid-handling systems and equipment, such as rotary joints, syphons, turbulator bars, expansion joints, and engineered steam and condensate systems; and doctoring, cleaning, and filtration systems and related consumables consisting of doctor systems and holders, doctor blades, cleaning shower and fabric-conditioning systems, forming systems and wear surfaces, and water-filtration systems. The Industrial Processing segment develops, manufactures, and markets ring and rotary debarkers, stranders, chippers, engineered knife systems, industrial automation and control, recycling and approach flow systems, and virgin pulping process equipment for use in the packaging, tissue, wood products, and alternative fuel industries. The Material Handling segment offers conveying and vibratory equipment, and baling products; and manufactures and sells biodegradable absorbent granules for carriers in agricultural, home lawn and garden, professional lawn, turf, and ornamental applications, as well as for oil and grease absorption. The company markets and sells its products, services, and systems through direct sales, independent sales agents, and distributors. The company was formerly known as Thermo Fibertek, Inc. and changed its name to Kadant Inc. in July 2001. Kadant Inc. was incorporated in 1991 and is headquartered in Westford, Massachusetts.