Caterpillar Inc.

Caterpillar has a large balance sheet with ample cash flows but also significant leverage. At the end of 2024 it reported about $6.9B in cash against $27.35B of long-term debt). Despite the debt load (largely used for share buybacks), interest expense is modest; in 2023 non-financing interest was just $511M against over $13B in pre-tax profit.

The company’s free cash flow has been very strong: FY2024 operating cash flow was $12.0B, allowing $7.7B of buybacks and $2.6B of dividends with cash to spare. Coverage ratios are comfortable in normal times, and Caterpillar’s access to capital markets appears solid. The financial products financing arm also helps earnings.

Overall, while the leverage is higher than a debt-free ideal, the business can service it easily with current profits. We consider financial risk moderate: Cat should weather a normal downturn, but a deep global recession could pressure its credit metrics.