Unnamed: 0 int64 | symbol string | quarter int64 | year int64 | date string | company_name string | company_id float64 | text string |
|---|---|---|---|---|---|---|---|
1,400 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | James Umpleby: Thank you, Rob. So to answer the last part of your question first. So on solar, we have seen some pretty interesting applications for solar that you're right, traditionally over the last 30 years. So there's been a lot of combined heat and power applications for solar. But as an example, we relatively recently sold some solar gas turbines in a power generation application for continuous duty for a data center in Ireland. And that's something that, again, we wouldn't have seen 20 years ago. So there are some more opportunities. And as I mentioned earlier, as we think about distributed generation for both recip and gas turbines and, again, our engines and turbines burn a whole variety of fuels, natural gas, biofuels, hydrogen blends and all the rest. We do see an increased opportunity for those distributed power generation opportunities over time. And we think that's a secular growth trend again that we're very excited about. As you think about Energy & Transportation, there's a lot of components there. So when you asked the question about kind of mix in oil and gas versus power generation, generally, we do quite well margin wise in our large engine. So that's something that we're quite excited about, the opportunities that we see moving forward. Of course, solar is a very good business as well. So again there's a lot of things there to think about not just power generation and oil and gas. But as we think about Energy & Transportation moving forward and our ability to again to grow that business and achieve strong margins, we feel quite good.
Operator: We'll move next to David Raso at Evercore ISI. |
1,401 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll move next to David Raso at Evercore ISI.
David Raso: Hi. Thank you for the time. I was curious, the retail sales machines, it sounds like you're expecting to be down again in the second half of the year. But anything you're hearing from the dealers to sort of be thoughtful about when you would expect retail machines, retail sales to pick back-up? Is there any indication from the order book or backlog within CI and RI? And with that also where do you expect the dealer inventory to end the year on machines? Thank you.
Andrew Bonfield: Yes. So let me start and help unpack that a little bit. So on the retail sales, two factors, obviously, retail sales in the quarter, one which was in North America. And most of that was actually rental fleet that does go into retail sales, but it actually is rental fleet loading by dealers. So that was most of that. And then Europe itself as well, which was still softer than we expect. Overall, our expectation now part of the reason why we've reduced our estimates for retail sales for the year is mostly due to that rental fleet loading. Our expectations are that although as Jim said, dealer rental revenue is still growing nicely, they will not load their fleet as much as we had originally expected at the beginning of the year, and that's relatively moderate. Overall on dealer inventory, as I said at the beginning of the year, as you know, dealer inventory is very complex, David. It's multiple segments, multiple business units, multiple dealers. And dealers are independent businesses. We expected the dealer inventory to be about flat for the year. We now expect a small reduction of machine dealer inventory, almost all of that will be in Resource Industries, which, as you know, is more a function of commissioning rather than anything else. And, overall, we expect to end the year with dealer inventory on the CI side about flattish and comfortably within the typical range that we talk about in three to four months. |
1,402 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll go next to Michael Feniger at Bank of America.
Michael Feniger: Thank you for taking my question. I'm curious when you look at your different segments, if we're entering a lower interest rate environment, a Fed easing cycle, where do you see -- what segments kind of reacting to a lower rate environment first? And just basically following up on that with the construction side with your response to David. Just is the assumption with your comfortability on the inventories, is that assuming that dealer retail sales gets better by the end of the year or is assuming where we are today? Thank you.
James Umpleby: Maybe I'll start and then I'll kick it over to Andrew just to talk about interest rates a bit. So if you stop and think about our business, there are certain aspects that are not as sensitive to interest rate movements and think about the build-out in data centers around power generation, oil and gas generally and government infrastructure as well. We talked a lot about in our previous calls the regulatory environment that has been supporting build-out in North America and we still feel good about that. And obviously that is less interest rate-sensitive. The parts of our business that are more interest rate sensitive, think about someone building possibly a warehouse in North America and needs construction equipment for that. Those kinds of activities do tend to be more interest rate-sensitive. So if interest rates come down, that certainly has the possibility to improve that business. And then I'll let Andrew. |
1,403 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Yes. Just on the dealer inventory thing, just a reminder, obviously, from today to the end of the year, we expect a reduction in machine dealer inventory, as I talked about, which is in line with our normal seasonal trend. Overall, effectively, our assumption of flattish dealer inventory in CI and remaining within the typical range implies is based on our expectations of retail sales. And there's always a forward-looking retail sales expectation rather than a backward-looking retail sales expectation.
Operator: We'll take our next question from Jerry Revich at Goldman Sachs.
Jerry Revich: Yes, hi. Good morning, everyone.
James Umpleby: Hi, Jerry.
Andrew Bonfield: Hi, Jerry.
Jerry Revich: Hi, Jim, Andrew. I'm wondering if you could just talk about what your prospect list looks like in Resource Industries based on industry and your competitor data. Looks like we've hit an air pocket in terms of orders. And obviously, deliveries have been weaker, and we've seen destock. Based on what you're seeing from your customers, when do you expect looking to reaccelerate for mining trucks and other equipment? |
1,404 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | James Umpleby: Thanks for your question, Jerry. As I mentioned earlier, there's a lot of positives in mining. Certainly, the utilization of our equipment is high. The number of parked trucks is relatively low. We expect robust service activity. Having said that, our customers are displaying capital discipline. But at the same time, one of the things to keep in mind is, one of the reasons that we saw lower sales is that we had kind of a backlog of a couple of products that we talked about in our prepared remarks, articulated trucks and off-highway trucks. And as we worked our way through that, that created a relative comp issue that you're seeing today. But having said that, certainly, there's a lot of interest in commodities such as copper. And we've seen areas of strength and things like large mining trucks and that activity as well, and that's positive. And we remain bullish about mining, just thinking about the energy transition and all of the commodities that our customers will use our products to produce. So again, we're not too concerned about just a quarterly deviation. What we're really focused on is more the medium and long-term over time and we remain quite bullish on the mining business.
Operator: We'll take our next question from Tami Zakaria at JPMorgan.
Tami Zakaria: Hey, good morning. Thank you so much. So my question is more longer term focused rather than this quarter or year. So can you help us frame how to think about Caterpillar's current portfolio of products that play into the data center market aside from backup generators? Are there any other products maybe related to micro grids or anything else to call out where you see an opportunity? And related to that, besides E&T as a segment, do data centers provide opportunities for any product or services within CI or RI as well over the medium to long-term? |
1,405 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | James Umpleby: We do believe. Thanks for your question. We do believe that the data center build-out creates opportunities in many areas across our business. So you mentioned backup generators. That's, obviously, that's an opportunity, which is here today that we're dealing with. In addition, I mentioned earlier the fact that data centers is increasing power generation requirements. So in the United States, I have the stats right, electricity demand was flat between, I think, between 2007 and 2022 and now it's starting to increase. And of course, our customers use our products to produce the commodities to satisfy that increase in electricity demand. In addition to that, I talked about the fact that both our reciprocated engines and our gas turbines we believe have the opportunity to be used in what we call distributed power generation applications. And a lot of that, again, is tied back to that data center build-out as electricity demand in the developed world continues to increase. And of course, in the developing world, as standards of living increase, power generation demands go up as well. And again, that's an opportunity for us as our customers use our products to produce the commodities to satisfy that increasing demand. In addition to that, yes, we do provide micro grids in our power generation organization. We work with customers to set up micro grids. That's one of the things that we do have the ability to do and we're pretty uniquely positioned just given our portfolio of products to help our customers do that. Also as you think about data center build-out, well, of course, that requires construction machinery as well and that helps our construction equipment business. And then, of course, thinking about copper and the other commodities that need to be produced to also support what's happening with increased power generation requirements that helps RI. So I believe that the data center build-out helps a whole variety of products across our portfolio.
Operator: We'll move next to Mig Dobre at Baird. |
1,406 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll move next to Mig Dobre at Baird.
Mircea Dobre: Thank you. Good morning, everyone. Just a quick follow-up on construction pricing. I guess it sounds like you expect a little bit of erosion here, but maybe we can get some insight in terms of the magnitude. I'm looking back at 2016, that's the last year where I think we saw two, three percentage points. Is that kind of a fair expectation to have going forward? And how do you think about used prices in this market and the potential impact that might have as we think about 2025 even? Thank you.
Andrew Bonfield: Yes, Mig. So absolutely will not be that sort of level of magnitude. We obviously see a normal element of competitive positioning, which obviously impacts pricing. Obviously, we don't expect list price changes. This will be really about customer-by-customer discussions. On the impact of used market, the used market obviously has had some impact, has seen some erosion of price. Actually, quite interestingly, where that impacts us more is around Cat Financial. And actually although used prices are coming down, they are still relatively high compared to historic levels, and inventories are very low. So we are not expecting that to impact us. The other area, obviously, does impact used prices would be around rental fleet. And obviously that and higher interest rates are having some impact on rental fleet loading as we talked about already in the call.
Operator: We'll go next to Kyle Menges of Citi.
Kyle Menges: Thank you and good morning, guys.
Andrew Bonfield: Hey, Kyle.
Kyle Menges: It'd be helpful just to hear a little bit more about the rental fleet loading kind of changing your expectations there for the second half of the year. I am curious just to parse out just what is kind of demand-related like softening demand in the second half versus you trying to manage the rental fleets versus kind of dealers trying to pushing back a little bit about taking fleet. Just would love to hear kind of what's driving that. Thank you. |
1,407 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Yes. So obviously, as Jim mentioned, rental -- dealer rental revenue is actually increasing positively as we expected for the year and that's driven by the level of activity. Our assumption when we started the planning year was the dealer fleet loading would be a certain number. It is slightly less than that and that's why we have taken it down. It is more around the fact that they are not loading their fleets quite as quickly and they're managing their fleet. That's what they do. They're independent businesses. They make decisions around how much fleet, how they move the fleet out into the market as well. And remember also, when you talk about rental fleet, particularly around things like heavy rents, heavy rents are effectively a long -- actually almost a rent to buy. And often that market is dependent on the customer choice as well. So it's not just the dealer here. You also have the customer at the other end of that equation as well as to when the timing when they make their final purchase. So a lot of those things, so it's a little bit complex, and therefore, is not one size fits all. But generally, we're still very comfortable, as Jim said, with the opportunity in front of the dealers on the rental side, and we're very positive about the long-term outlook. |
1,408 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | James Umpleby: And maybe just to add in, we want our dealers to have a profitable, growing rental business. And utilization is an important part of that. So it's not a situation where we're encouraging to take more equipment than they need. We don't want them to take more equipment from us than they need. We want them to have a growing, profitable rental business. And we believe that's a growing opportunity for them and for us over time. And again, there will be quarterly deviations in terms of how much equipment they decide to take into the rental fleet. The point is it's a growing growth opportunity for both us and our dealers. And we're very supportive and are helping them with a variety of tools, whether it's digital tools and also other methodologies to help them grow their rental business.
Andrew Bonfield: Yes. Just again just contextualizing sort of from a size perspective because I think sometimes things seem a little bit bigger. Just to remind you, then in terms of CI, this is still a relatively small number, but it is what is driving some of that change in our outlook, which again is relatively modest. So just before people start worrying that it's a bigger element and a bigger number than it really is. Remember, OEM sales, about 40% of our revenues come from services across the business. Only about 60% is original equipment. And again that does vary by segment. And North America is not 100% of CI sales either.
Operator: We'll move next to Steven Fisher at UBS.
Steven Fisher: Thanks. Good morning. You mentioned, Jim, the gas compression is starting to soften a little bit. Curious just kind of where you are in the backlog there? Do you expect your sales in gas compression actually be down year-over-year in the second half? And maybe what visibility do you have to rebuilding the backlog there and what it might take? Is it a next round of big LNG projects or how do we think about that? Thank you. |
1,409 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | James Umpleby: Yes. So we do expect for the year, I believe, I said that we expect gas compression year-over-year to be higher. So higher in 2024 than 2023. We did say we expected a bit of softening in the second half, but still, again, gas compression higher in 2024 total than in 2023. You asked about backlog. Again, we do have quite a strong backlog in our large engines across and our gas turbines around E&T. So again we feel good about that as well. And the comment we made about gas compression that was really recip oil and gas. We expected to soften in the second half of the year, but it didn't. Solar turbines, it also serves oil and gas. And our comment was about recent engines in oil and gas. And again a lot of strength in E&T overall.
Operator: We'll go next to Angel Castillo at Morgan Stanley.
Angel Castillo: Hi. Good morning. Thanks for taking my question. Just wanted to maybe unpack the backlog dynamic around CI if you could give us a little bit more color. So kind of a three-part question. One, what were the orders in the second quarter for CI? Two, kind of on the backlog. What's kind of the coverage that you have at this point versus your historical levels, just given that we had a pretty strong demand over a number of years? And then kind of lastly, just can you talk about kind of the price margin mix within that backlog as we kind of have visibility now looking forward versus maybe what was in there before? |
1,410 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Yes. So Angel, we obviously do not break down backlog by segment. So that's just a point. I would say to you, though, we did have a high level of orders in the second quarter in CI of 2023. Part of that was, if you remember, we did see a dealer inventory build in the third quarter. Some of that was ahead of an engine switchover. So it's not a -- it is down year-over-year, but that is partly because of the comparison we actually -- as a result of that change in the NPI last year, the new product introduction. Again, similarly, mix varies across the businesses. And obviously there are different parts of our business which are more profitable than others. And you did see -- we do see favorable product mix in CI. And obviously that does remain -- that is a function of what products are being sold and in what proportion. With regards to the backlog, I mean, the backlog for CI reflects availability. And as you know, availability now is pretty good. And that lies in about our 13 week time period, which we would consider to be about the norm of three months.
Operator: We'll take our next question from Tim Thein at Raymond James.
Timothy Thein: Great. Thank you. Good morning. Jim, maybe a question for you just on -- another CI related one, just on the balance between market share and pricing and just thinking, obviously, over the long-term, PINS a very important concept for Cat. And just thinking about how you and tied in with that, the ambition to grow services. Just thinking as to -- as the market first time and some time now we're dealing with kind of free flowing supply and maybe a little bit more competition and capital directed at North America, just how you balance -- how are you and the dealers balance that, again, motivation to grow PINS while also kind of balancing that price equation. Thank you. |
1,411 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | James Umpleby: Yes, certainly PINS are very important to us, and we make pricing decisions based on a whole variety of inputs. Obviously, we look at our input costs, we look at our competitive situation. And we're continually working to add more value to our customers. So it's not just a price situation. Price is important and we need to remain competitive. But again we have some real advantages, we believe. One is our dealer network, again, one of our most significant competitive advantages. We have a distribution network that none of our competitors have. In addition to that, we continue to invest significantly in technology to help our customers be more successful. All the tools that we're putting into our machines to, for example, allow our customer to hire a relatively inexperienced operator and have them operate a machine like a pro who's been at it for many years. So again, there's a lot that goes into that, a lot of investments in services capabilities, a lot of investments in technology as well. But certainly, yes, we recognize PINS are important as it helps seed the market for future services growth and it's something we're very focused on.
Ryan Fiedler: Hey, Audra, we have time for one more question.
Operator: Thank you. Today's final question comes from the line of Nicole DeBlase from Deutsche Bank.
Nicole DeBlase: Yeah, thanks. Good morning, guys.
James Umpleby: Good morning, Nicole.
Andrew Bonfield: Hi, Nicole.
Nicole DeBlase: Just a couple of follow-ups on CI. I guess I was kind of surprised by the strength in Latin America this quarter, a big year-on-year growth. Can you just talk a little bit about the drivers there and also what you're seeing in EAME? And is there any signs of life in Europe or are things just kind of bouncing along the bottom there? Thank you. |
1,412 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Yes. So Nicole, on Latin America, actually Brazil was strong, which is an important market for us and that was part of the reason for the strength. So that was good. And obviously, we'll keep an eye out and hope that, that continues as we go through the remainder of the year and looking forward. Europe, as we indicated, has been a problem. It's been a problem. I think most of our competitors have made similar comments as well. It does seem to be a little bit on the bottom. Obviously, it's depending what happens there, obviously, you've seen the ECB cut rates. There is, for example, today in the UK that we talked about construction -- actually growth in construction this last month. So hopefully, it is starting to pick up, but our assumption really is that it doesn't pick up that quickly for the remainder of the year.
James Umpleby: All right. With that, we'll just thank you all for your questions. We greatly appreciate it. I want to just close by thanking our global team for their strong execution in the first half of the year and achieved higher adjusted operating profit margin, record adjusted profit per share and strong ME&T free cash flow. And our results continue to reflect the benefit of the diversity of our end-markets as well as our disciplined execution of our strategy for long-term profitable growth. With that, I'll turn it back to Ryan.
Ryan Fiedler: Thanks, Jim, Andrew and everyone who joined us today. A replay of our call will be available online later this morning. We'll also post a transcript on our Investor Relations website as soon as it's available. You'll also find the second quarter results video with our CFO and an SEC filing with our sales to users data. Click on investors.caterpillar.com and then click on Financials to view those materials. If you have any questions, just please reach out to Rob or me. The Investor Relations general phone number is 309-675-4549. Now let's turn the call back to Audra to conclude our call. |
1,413 | CAT | 2 | 2,024 | 2024-08-06 08:30:00 | Caterpillar Inc. | 259,378 | Operator: Thank you. That concludes our call for today. Thank you for joining. You may all disconnect. |
1,414 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Operator: Welcome to the First Quarter 2024 Caterpillar Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ryan Fiedler. Thank you. Please go ahead.
Ryan Fiedler : Thanks, Audra. Good morning, everyone. Welcome to Caterpillar's first quarter of 2024 earnings call. I'm Ryan Fiedler, Vice President of Investor Relations. Joining me today are Jim Umpleby, Chairman and CEO; Andrew Bonfield, Chief Financial Officer; Kyle Epley, Senior Vice President of the Global Finance Services Division; and Rob Rengel, Senior Director of IR. During our call, we'll be discussing the first quarter earnings release we issued earlier today. You can find our slides, the news release, and a webcast recap at investors.caterpillar.com under Events and Presentations. The content of this call is protected by U.S. and international copyright law. Any rebroadcast, retransmission, reproduction, or distribution of all or part of this content without Caterpillar's prior written permission is prohibited. Moving to slide two. During our call today, we'll make forward-looking statements which are subject to risks and uncertainties. We'll also make assumptions that could cause our actual results to be different than the information we're sharing with you on this call. Please refer to the recent SEC filings and the forward-looking statements reminder in the news release for details on factors that, individually or in aggregate, could cause our actual results to vary materially from our forecast. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. On today's call, we'll also refer to non-GAAP numbers. For a reconciliation of any non-GAAP numbers to the appropriate U.S. GAAP numbers, please see the appendix of the earnings call slides. Now I'll turn the call over to our Chairman and CEO, Jim Umpleby. |
1,415 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Jim Umpleby : Thanks, Ryan. Good morning, everyone. Thank you for joining us. I'd like to start by thanking our global team for delivering another strong quarter, including higher adjusted operating profit margin, record adjusted profit per share, and strong ME&T free cash flow. Our strong balance sheet and ME&T free cash flow allowed us to deploy a record $5.1 billion of cash for share repurchases and dividends in the first quarter. Our results reflect a continuation of healthy demand for our products and services across most of our end markets. We remain focused on executing our strategy and continue to invest for long-term profitable growth. I'll begin with my perspectives about our performance in the quarter. I'll then provide some insights about our end markets, followed by an update on our sustainability journey. It was another strong quarter. Sales and revenues were about flat in the quarter versus last year, broadly in line with our expectations. Services revenues increased in the quarter. Our adjusted operating profit increased by 5% to $3.5 billion. Adjusted operating profit margin was slightly better than we expected and improved to 22.2% up a 110 basis points versus last year. We achieved a record adjusted profit per share of $5.60 up 14%. We also generated strong ME&T free cash flow in the quarter of $1.3 billion. In addition, our backlog increased to $27.9 billion up $400 million versus the fourth quarter of 2023. We continue to expect 2024 sales and revenues to be broadly similar to the record 2023 level. We have revised our full year 2024 segment expectations to reflect a slightly stronger top line in Energy & Transportation offset by softening in the European market for Construction Industries. We anticipate services to be higher in 2024 as we strive to achieve our 2026 target of $28 billion. For the year, we continue to expect adjusted operating profit margin and ME&T free cash flow to be in the top half of our target ranges. Turning to slide four. In the first quarter of 2024 sales and |
1,416 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | ME&T free cash flow to be in the top half of our target ranges. Turning to slide four. In the first quarter of 2024 sales and revenues remained about flat at $15.8 billion. Compared to our expectations, sales volume was slightly lower while price realization, including geographic mix, was better than we anticipated. Compared to the first quarter of 2023, overall sales to users decreased by 5%. This was slightly lower than we expected, mainly due to weakness in Europe for Construction Industries. Energy & Transportation continued to show strength, where sales to users increased 9%. For machines, which includes Construction Industries and Resource Industries, sales to users declined by 9%. Focusing on Construction Industries, sales to users were down 5%. In North America, our largest geographic region for Construction Industries, sales to users increased as expected, and demand remained healthy for both non-residential and residential construction. Construction projects, as well as government related infrastructure, continue to benefit non-residential demand. Although residential sales to users in North America were down slightly, demand for new housing remained strong. Sales to users declined in EAME primarily due to weakness in Europe related to residential construction and economic conditions. Latin America and Asia Pacific sales to users also saw some declines. In Resource Industries, sales to users declined 17% in the first quarter compared to a very strong first quarter in 2023. Mining, as well as heavy construction and quarry and aggregates were lower, mainly due to softness in off-highway and articulated trucks that we mentioned during our last earnings call. In Energy & Transportation, sales to users increased by 9%. Oil and gas sales to users benefited from strong sales of turbines and turbine-related services. We also saw increased sales of reciprocating engines in the gas compression and well servicing oil and gas applications. Power generation sales to users grew as market conditions remained |
1,417 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | gas compression and well servicing oil and gas applications. Power generation sales to users grew as market conditions remained favorable, including strong data center growth. Transportation sales to users increased while industrial declined as we expected from strong levels last year. In total, dealer inventory increased by $1.4 billion versus the fourth quarter. For machines, dealer inventory increased by $1.1 billion, which was slightly higher than our expectations, largely due to sales to users being modestly lower than anticipated. The increase in machine dealer inventory is consistent with normal seasonal patterns of which Construction Industries products accounted for the majority of the increase. The total level of machine dealer inventory is comfortably within the typical range. As I mentioned, backlog increased to $27.9 billion, up $400 million versus the fourth quarter of 2023, led by Energy & Transportation. Backlog remains elevated as a percentage of revenues compared to historical levels. Adjusted operating profit margin increased to 22.2% in the first quarter, a 110 basis point increase over last year, which was slightly better than we anticipated. This was primarily due to better than expected manufacturing costs, mainly related to freight. Moving to slide five. We generated strong ME&T free cash flow of $1.3 billion in the first quarter. We deployed $5.1 billion of cash for share repurchases and dividends in the first quarter, including the initiation of a $3.5 billion accelerated share repurchase program which may last up to nine months. We remain proud of our Dividend Aristocrat status and continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now on slide six, I'll describe our expectations moving forward. We expect a continuation of healthy demand across most of our end markets for our products and services. We continue to anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. As I |
1,418 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | products and services. We continue to anticipate 2024 sales and revenues to be broadly similar to the record 2023 level. As I mentioned, we expect services to continue to grow in 2024. We currently do not anticipate a significant change in dealer inventory in machines in 2024, compared to a $700 million increase in 2023. This is expected to be a headwind to sales in 2024. As a reminder, dealers are independent businesses and manage their own inventories. The vast majority of dealer inventories in Energy & Transportation are backed by firm customer orders. The timing of these products being recognized as sales to users is impacted by dealer packaging and commissioning, which is why it is difficult to predict dealer inventory in E&T. This is why we have become more explicit about the differentiation between machine dealer inventory and total dealer inventory. As I mentioned, we anticipate that our 2024 results will be within the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. Our strong results continue to reflect the diversity of our end markets, as well as the disciplined execution of our strategy for profitable growth. Now, I'll discuss our outlook for key end markets starting with Construction Industries. In North America, after a very strong 2023, we continue to expect demand in the region will remain healthy in 2024 for both non-residential and residential construction. We anticipate non-residential construction to remain at similar levels to slightly higher demand levels compared to last year due to construction projects, as well as government related infrastructure. Residential construction demand is expected to be flat to slightly down versus last year, which remains strong in comparison to historical levels. In Asia Pacific, outside of China, we are seeing some softening in economic conditions. We anticipate demand in China will remain at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in |
1,419 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | at a relatively low level for the above 10-ton excavator industry. In EAME, we anticipate that weak economic conditions in Europe will continue, somewhat offset by strong construction activity in the Middle East. Construction activity in Latin America remains mixed, but overall, we are expecting modest growth. In addition, we expect the ongoing benefit of our services initiatives will positively impact Construction Industries in 2024. Next, I'll discuss Resource Industries. After strong performance in 2023 in mining, as well as heavy construction and quarry and aggregates, we anticipate lower machine volume versus last year, primarily due to off-highway and articulated trucks. In addition, we anticipate a small decrease in resource industry dealer inventories during 2024 versus a slight increase last year. While we continue to see a high level of quoting activity overall, we anticipate lower order rates as customers display capital discipline. We expect to see higher services revenues, including robust rebuild activity. Customer product utilization remains high, the number of parked trucks remains low, and the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance. We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market, and providing further opportunities for long-term profitable growth. Moving to Energy & Transportation. In oil and gas, we expect reciprocating engines and services to be about flat after strong 2023 performance. We expect reciprocating gas compression demand to be higher in 2024 than it was in 2023. While servicing demand in North America is expected to soften, Cat reciprocating engine demand for power generation is expected to remain strong, largely due to continued data center growth relating to Cloud Computing and Generative AI. Last quarter, I mentioned we are making a multi-year capital investment in our large reciprocating engine division, including increasing |
1,420 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | I mentioned we are making a multi-year capital investment in our large reciprocating engine division, including increasing capacity for both new engines and aftermarket parts. This investment will approximately double output for large engines and aftermarket parts as compared to 2023. We leverage these large engines across a variety of applications, including data centers, oil and gas, large mining trucks, and distributed power generation. For Solar Turbines, our backlog and quoting activity both remain strong for oil and gas and power generation. As we said previously, industrial demand is expected to soften relative to a strong 2023. In transportation, we anticipate high-speed marine to increase as customers continue to upgrade aging fleets. Moving to slide seven, I'll provide an update on our sustainability journey. We are contributing to a reduced carbon future and continue to invest in new products technologies and services, to help our customers achieve their climate related objectives. In January we announced the signing of an electrification strategic agreement with CRH to advance the deployment of Caterpillar‘s Zero-Exhaust Emissions Solutions. CRH is the number one aggregate producer in North America and the first company in that industry to sign such an agreement with Caterpillar. The agreement is focused on accelerating the deployment of Caterpillar’s 70-ton to 100-ton class battery electric off-highway trucks and charging solutions at a CRH site in North America. Through the agreement CRH will participate in Caterpillar’s early learner program for battery electric off-highway trucks. In February Caterpillar oil and gas announced the launch of the Cat Hybrid Energy Storage Solution to help drillers and operators cut fuel consumption, lower total cost of ownership and reduce emissions in oil and gas operations. The custom designed energy storage system stores excess power from the job site and then discharges it as needed. In a hybrid system that combines the Cat Hybrid Energy Storage Solution in a |
1,421 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | the job site and then discharges it as needed. In a hybrid system that combines the Cat Hybrid Energy Storage Solution in a natural gas fuel generator set, the transient response is even quicker than a conventional diesel only rigs. Depending upon site configuration the Hybrid Energy Storage Solution has proven to deliver up to 30% fuel cost savings with natural gas, 85% fuel cost savings with fuel gas, and up to an 80% reduction in nitrogen oxides. Carbon dioxide equivalent reductions up to 11% and 7% are possible with natural gas and fuel gas respectively. In addition, we look forward to issuing our 19th Annual Sustainability Report in May. The material in our report reinforce our ongoing commitment to sustainability. With that I'll turn it over to Andrew. |
1,422 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Thank you, Jim. Good morning everyone. I'll begin by commenting on the first quarter results, including the performance of our segments. Then I'll discuss the balance sheet and ME&T free cash flow before concluding with a few comments on the full year and our assumptions for the second quarter. Beginning on slide eight. Our operating performance was strong with both adjusted operating profit margin and adjusted profit per share, being better than we had expected. Sales and revenues of $15.8 billion were about flat compared to the prior year, broadly in line with our expectations. Adjusted operating profit increased by 5% to $3.5 billion and the adjusted operating profit margin was 22.2% an increase of 110 basis points versus the prior year which was slightly better than we had expected. Profit per share was $5.75 in the first quarter, compared to $3.74 in the first quarter of last year Adjusted profit per share increased by 14% to $5.60 in the first quarter, compared to $4.91 last year. Adjusted profit per share excluded net restructuring income of $0.15 per share, this compares to restructuring expense of $1.17 which was excluded in the first quarter of 2023. Other income of $156 million for the quarter, was higher than the first quarter of 2023 by $124 million, this primary related to favorable ME&T balance sheet translation. The provision for income taxes in the first quarter excluding discrete items, reflected a global annual effective tax rate of 22.5% compared with 23% in the first quarter of 2023. Included in profit per share and adjusted profit per share was a benefit of $38 million or $0.08 for a discrete tax item related to stock based compensation. A comparable benefit of $32 million or $0.06 per share was included in the first quarter of 2023. The year-over-year impact of a reduction in the number of shares primarily due to share repurchases over the past year, had a favorable impact on adjusted profit per share of approximately $0.24. This included a favorable impact from the |
1,423 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | year, had a favorable impact on adjusted profit per share of approximately $0.24. This included a favorable impact from the initial shares we received, from the $3.5 billion accelerated share repurchase agreement that Jim mentioned earlier. Before, I move on you will have seen some additional detail on earnings release segment commentaries. We continue to highlight the primary drivers of year-over-year changes in sales and profit by segment, as we have done previously, but in addition we are now also quantifying those significant variances. You will also find some additional information on historical dealer inventory, including at the machines level in the appendix of today's slides Moving to slide nine. I'll discuss our top line results in the first quarter. Sales remained about flat compared to the prior year, as lower volume was largely offset by favorable price realization. The decline in volume was primarily due to lower sales to users. As Jim mentioned, the 5% decrease in sales to users was slightly more than our expectations, mainly driven by weakness in Europe for Construction Industries. Changes in total dealer inventories did not have a significant impact on sales, as the increase of $1.4 billion in the quarter was similar to the increase last year. As Jim mentioned, the $1.1 billion increase for machines was slightly higher than we had anticipated, primarily as sales to users were modestly lower than we had expected. As compared to our expectations for the quarter, sales were broadly in line. Sales volume was slightly lower than we had anticipated, while price realization, including geographic mix, was better than we had expected. By segment, sales in Construction Industries were lower than we had anticipated, while sales in Energy & Transportation exceeded our expectations. Resource Industry sales were about in line. Moving to operating profit on Slide 10. The first quarter operating profit increased by 29% to $3.5 billion. As a reminder, the prior year included a $586 million charge that arose from |
1,424 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | operating profit increased by 29% to $3.5 billion. As a reminder, the prior year included a $586 million charge that arose from the divestiture of the company's long-haul business. Adjusted operating profit increased by 5% to $3.5 billion. Price realization benefited the quarter, while lower sales volume acted as a partial offset. The adjusted operating profit margin of 22.2% improved by 110 basis points versus the prior year. Margins were slightly better than we had anticipated, mainly due to favorable manufacturing costs, as freight costs were lower than we had expected. Price, including a benefit from geographic mix, was also better than we had anticipated. Now on slide 11, I'll review segment performance, starting with Construction Industries. Sales decreased by 5% in the first quarter to $6.4 billion, primarily due to lower sales volume, partially offset by favorable price realization. Sales were slightly lower than we had anticipated. Sales in North America increased by 6% in the quarter. In the EAME region, sales fell by 25%, and in particular, Europe was lower than we had anticipated, impacted by weakness in residential construction and economic conditions. In Latin America, sales decreased by 1%. In Asia Pacific, sales decreased by 14%. First quarter profit for Construction Industries was $1.8 billion, a slight decrease versus the prior year. The decrease was mainly due to lower sales volume, partially offset by favorable price realization and manufacturing costs. The segments margin of 27.5% was an increase of 100 basis points versus the last year. This was better than we had expected due to favorable manufacturing costs, which largely reflected lower freight costs. Turning to slide 12, Resource Industries sales decreased by 7% in the first quarter to $3.2 billion, which was about in line with our expectations. The decrease was primarily due to lower sales volume, partially offset by favorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users, |
1,425 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | offset by favorable price realization. The decrease in sales volume was mainly driven by lower sales of equipment to end users, which Jim explained. First quarter profit for Resource Industries decreased by 4% versus the prior year to $730 million. The decrease was mainly due to lower sales volume, partially offset by favorable price realization. The segments margin of 22.9% was an increase of 60 basis points versus last year. This is better than we had expected on stronger price and favorable manufacturing costs, driven mainly by lower freight costs. Now on slide 13, Energy & Transportation sales increased by 7% in the first quarter to $6.7 billion. The increase was primarily due to higher sales volume and favorable price. Sales were stronger than we had expected, mostly due to increased deliveries of large engines. By application, power generation sales increased by 26%, oil and gas sales improved by 19%, transportation sales were higher by 9%, while industrial sales decreased by 21%. First quarter profit for Energy & Transportation increased by 23% versus the prior year to $1.3 billion. The increase was primarily due to favorable price realization. The segments margin of 19.5% was an increase of 260 basis points versus the prior year. The margin was significantly stronger than we had anticipated due to lower than expected manufacturing costs, higher volume, and better price. Moving to slide 14, Financial Products revenues increased by 10% to $991 million, primarily due to higher average financing rates across all regions and higher average net earning assets in North America. Segment profit was strong, increasing by 26% to $293 million. The increase was mainly due to an insurance settlement and a favorable impact from equity securities. Our portfolio continues to perform well as past dues remain near historic lows at 1.78%, a 22 basis point improvement compared to the first quarter of 2023. This is the lowest first quarter past dues since 2006. In addition, the allowance rate was our lowest on record at |
1,426 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | of 2023. This is the lowest first quarter past dues since 2006. In addition, the allowance rate was our lowest on record at 1.01%. Business activity remains strong as new business volume increased versus the prior year, primarily driven by North America. We continue to see strong demand for used equipment and inventories remain close to historically low levels, with just slight increases over recent quarters. Moving on to slide 15. As Jim mentioned, our ME&T free cash flow remains strong. We generated $1.3 billion in the quarter after taking into account the $1.7 billion payments made for 2023 short-term incentive compensation and CapEx spend of about $500 million. Spend for both short-term incentive compensation and CapEx was higher than it was in the first quarter of 2023. For the full year, we expect to be in the top half of our ME&T free cash flow target range, which correlates to between $7.5 billion and $10 billion. We still expect to spend between $2 billion and $2.5 billion in CapEx, and we will continue to prioritize investments around AACE, which is autonomy, alternative fuels, connectivity, and digital and electrification. Moving to capital deployment. We continue to expect to return substantially all our ME&T free cash flow to shareholders over time through dividends and share repurchases. Of the record $5.1 billion of cash deployed in the first quarter, share repurchase spend was $4.5 billion, including the $3.5 billion accelerated share repurchase, or ASR. The $3.5 billion were deployed in the first quarter, and the ASR agreement may last for up to nine months. The ASR provides us with favorable pricing as compared to shorter-term ASRs, which we have carried out previously, which makes it more attractive. Price is finally determined relative to the volume-weighted average price, or VWAP, over the duration of the agreement. Approximately 70% of the shares were delivered to the company up front, but the balance calculated when the agreement is terminated based on the actual average VWAP. As a |
1,427 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | to the company up front, but the balance calculated when the agreement is terminated based on the actual average VWAP. As a reminder, our objective is to be in the market on a more consistent basis with share repurchases, so this is a great mechanism for us to use. As I mentioned, our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $5 billion, and we hold an additional $2.2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Moving to slide 16, I will share our high-level assumptions for the full year. As compared to a quarter ago, our assumptions for the full year generally remain unchanged. On the top line, we anticipate broadly similar sales and revenues as compared to the record 2023 level, consistent with what we mentioned last quarter. Although our top-level sales expectations remain the same, segment inputs have shifted a bit. We now see a slightly stronger top line in Energy & Transportation after a strong first quarter, while our expectations have been tampered slightly in Construction Industries due to economic conditions in the European market. We continue to expect slightly favorable price realization versus the prior year. Our expectations on dealer inventory also remain unchanged. We currently do not expect a significant change in dealer inventory of machines in 2024 compared to a $700 million increase in 2023. This is expected to be a headwind to sales. We also continue to anticipate another year of services growth across each of our primary segments as we strive to achieve our 2026 target of $28 billion in services revenues. At the segment level, we now expect Construction Industries sales to users to be slightly lower compared to 2023 due to the softer economic conditions in Europe. We expect demand in North America to remain at healthy levels, as Jim discussed. We also anticipate changes in dealer inventory to act as a headwind to Construction Industries sales in 2024. We expect sales service revenues to be |
1,428 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | in dealer inventory to act as a headwind to Construction Industries sales in 2024. We expect sales service revenues to be positive versus the prior year. In Resource Industries, we continue to expect lower sales impacted by lower machine volume, primarily in off-highway and articulated trucks, where the comparison versus the prior year is challenging. We anticipate changes in dealer inventory to act as a headwind to sales in this segment as well. In Energy & Transportation, our 2024 sales expectations have increased slightly after the strong first quarter. We continue to see strong demand for reciprocating engines in power generation, as well as healthy order and quoting activity for Solar Turbines for both oil and gas and power generation. This supports our improved optimism for higher sales in Energy & Transportation in 2024. Also, as typical seasonality would suggest, we expect to see some sales ramp in Energy & Transportation as we move through the full year. On full year adjusted operating profit margin, we continue to expect to be in the top half of the margin target range at our expected sales levels. As I mentioned last quarter, we expect a relatively small pricing benefit to be weighted towards the first half of the year, given carryover from increases in the second half of last year. We now expect flattish manufacturing costs this year versus the prior year, as we anticipate more favorable freight costs, although the unfavorable impact from cost absorption could act as a partial offset. As I mentioned a quarter ago, given better availability this year, we anticipate shipping a more normal mix of products this year. We anticipate this dynamic may act as a slight headwind to margins. SG&A and R&D expenses are expected to ramp through the remainder of the year as we continue to invest in strategic initiatives aimed at future long-term profitable growth. This will be offset by the benefit of lower short-term incentive compensation. In addition, from a segment perspective, keep in mind that margins in |
1,429 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | the benefit of lower short-term incentive compensation. In addition, from a segment perspective, keep in mind that margins in Construction Industries tend to trend lower as the year progresses. Finally, we continue to anticipate restructuring costs of $300 million to $450 million this year, and our expectation for annual effective tax rate, excluding discrete items, is now 22.5%. Now on slide 17, I'll discuss our expectations for the second quarter, starting with the top line. We expect lower sales in the second quarter compared to the prior year, as we anticipate a headwind due to changes in dealer inventory of machines which will impact volumes. We expect dealer inventory of machines to decline this quarter in line with normal seasonal trends, versus the atypical $200 million increase that occurred in the second quarter of 2023. However, we anticipate a continuation of healthy demand across most of our end markets for our products and services, and prices expected to remain positive year-over-year. Following the typical seasonable pattern, we do expect higher sales in the second quarter as compared to the first. By segment compared to the prior year, we anticipate lower sales in Construction Industries as we expect changes in dealer inventory to act as a headwind. Favorable price should that provide a partial offset. We expect lower sales in resource industries versus the prior year, driven by lower volume, partially offset by favorable price. In Energy & Transportation, we anticipate similar sales versus the prior year. On enterprise margins in the second quarter, we expect the adjusted operating profit margin to be similar to the prior year, and lower versus the first quarter, following the typical seasonable pattern. As compared to the prior year, we could expect that price will remain favorable from the continued carryover benefit from increases taken in the second half of 2023. We expect flattish manufacturing costs compared to the prior year, as favorable freight is expected to offset the impacts of |
1,430 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | We expect flattish manufacturing costs compared to the prior year, as favorable freight is expected to offset the impacts of unfavorable cost absorption. We also anticipate an increase in SG&A and R&D expenses related to strategic investments, although this will be offset by lower short-term incentive compensation. By segment, in both Construction Industries and Resource Industries, we expect similar margins in the second quarter compared to the prior year, as we expect favorable price to be offset by lower volume. In Energy & Transportation, we expect a higher margin versus the prior year on better price and favorable mix. Unfavorable manufacturing costs and SG&A and R&D spend related to strategic investments are expected to act as a partial offset in this segment. Note that we expect a headwind to enterprise margins and corporate costs in the quarter, where we anticipate unfavorable year-over-year impacts from timing differences. So turning to slide 18, let me summarize. The strong operating performance continued in this quarter, with the adjusted operating profit margin at 22.2%, and record adjusted profit per share of $5.60. We deployed a record $5.1 billion of cash per share repurchases and dividends in the quarter. Our assumptions for the full year remain similar, and we expect to be in the top half of our target ranges for both adjusted operating profit margin and ME&T free cash flow. We continue to execute our strategy for the long-term profitable growth. And with that, we'll take your questions. |
1,431 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Operator: Thank you. [Operator Instructions] We'll take our first question from Tami Zakaria at JP Morgan.
Tami Zakaria: Hi, good morning. Thank you so much.
Jim Umpleby: Good morning, Tami.
Tami Zakaria: Hi. How are you? So, nice margin performance in the quarter, and hence my question is around margins you guided for the second quarter. So if sales are expected to be lower year-over-year, I'm assuming volumes are down too. So what essentially would help margins remain relatively flattish? Is it price? I know you mentioned some factors, but just wanted more color. Is it price cost? Is it some cost-savings initiatives or is it something else that's going on? So, any color there would be helpful.
Andrew Bonfield: Yeah. So, at the moment there are two factors. One, which is obviously price, will still be positive in the second quarter, and that will help overall margins and will help to offset the impact of lower volume. Also, we do expect to see some flattening of manufacturing costs versus the prior year, mostly because of freight. We would expect the benefit of lower freight costs to offset the impact of cost absorption, which may occur in the quarter, so those are two factors. And then we will expect the increase in investments we're making behind our strategic investments and SG&A and R&D, to be offset by lower short-term incentive compensation expense. So those are all the moving parts, but overall as we said, we expect margins to be about flat year-over-year in the second quarter versus second quarter of 2023.
Operator: We'll move next to Michael Feniger at Bank of America. |
1,432 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll move next to Michael Feniger at Bank of America.
Michael Feniger: Great. Thanks for taking my question. I know your guiding Q2 sales to be lower year-over-year, and the full year to be broadly similar. So maybe you could give us some context of what's driving that second half, that slight pick-up. Is it deliveries in a certain market like E&T? And is your expectations that end-user dealer retail sales which pulled back in Q1, do you think that's the low point for the year and that starts to improve through the year to match that full year guide? Any context there would be helpful?
Andrew Bonfield: Yeah. So overall as we said, really what's happening in Q2 is principally the impact on lower volume will be around the impact of dealer inventory movements, particularly on the machine side. Last year, as I said, we actually had a very atypical build in the second quarter. As you know, the historic trend is always during selling season to see, particularly on the CI side, dealer inventory to decrease. So that was really the main driver. Overall, as we've indicated for the year, we still expect healthy volume in North America in CI. We do have some impact now on Europe. That means we now expect CI STUs to be slightly lower year-over-year. We are seeing that offset though by expected sales growth in energy and transportation, where we're seeing more positivity than we've seen. As far as STUs are concerned, obviously the first quarter was impacted by those, principally the European conditions which we mentioned a moment ago. Overall, we're still very comfortable, but the overall guide we've made for the year, which is sales and revenues, will be broadly flat with 2023.
Operator: We'll move to our next question from Jamie Cook at Truist Securities. |
1,433 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll move to our next question from Jamie Cook at Truist Securities.
Jamie Cook: Hey. Good morning, everyone. Nice quarter. Jim, I guess my question, under your leadership, I think the earnings power of Caterpillar has far exceeded anyone's expectation, and a lot of that was driven by the O&E business model and your focus on profitable growth. At the same time, you've been allocating capital to higher return products right, that's part of the strategy. At the same time, you are talking about doubling, I think you said your large engine capacity to meet demand for data centers and this is, now your lower – at this point it's your lower margin segment. So I guess understanding right now with ME&T, we have investment in AACE and capacity. But like over time, why shouldn't E&T margins structurally be higher than the other two segments, in particular given where construction margins are right now? I'm just wondering if the market under appreciates where E&T margins can go, given the capacity additions you are talking about. Thank you. |
1,434 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Jim Umpleby: Jamie, it's a good question. One of the things to keep in mind is that many of the investments we're making, a lot of electrification in other areas, the costs are absorbed in energy and transportation, so that's one of the things that has an impact on the margin of the total segment. And as you quite rightly mentioned, we're very focused on investing in areas that represent the best opportunities for future profitable growth. And as we look at the margin opportunities around large engines, that's certainly an area that very much deserves our investment, in both capital and expense and management attention as well. So certainly, as you know, our primary measure of profitable growth is absolute OPACC dollars, and we're trying to increase that. Having said that, we provided our margin targets and we said we'd be in the upper half of the range. But again, we're investing in areas that represent very good opportunities for profitable growth, and that includes large engines. So I'm not saying that margins won't come up in E&T. Again, the one thing to keep in mind here is that a lot of costs go into that segment that really benefits some of the other segments.
Operator: We'll move next to David Raso at Evercore ISI. |
1,435 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll move next to David Raso at Evercore ISI.
David Raso: Hi, thank you for the time. I think some of the concern around the second half of the year, sales having to be positive to offset the first half being down, it would be helpful if you can give us a little sense of the implied orders for the quarter actually did turn slightly positive year-over-year. Can you give us any color that you can around sort of what moved in the backlog sequentially, E&T, CI, RI, just so we can get a sense of, was the order improvement year-over-year solely E&T? Was there any order improvement year-over-year in RI and CI, just to maybe build more confidence in the second half of the year sales growth? And of course, any color around some of the E&T orders. You get the impression some are very long-dated orders. Just trying to get a sense of that order flow in E&T, how soon can those orders show up in revenues? Thank you.
Jim Umpleby: David, let me answer the last part of your question first. So, in terms of E&T, about 80% of our total CAT backlog is expected to be sold within 12 months, and we don't put orders into the – we don't put things into the backlog unless we have a firm customer order. So we work really closely with our customers, as an example with customers that are looking for large engines for data centers, and we have a sense going out multiple years of what it is they want, but we don't put any of that into the backlog until they give us a firm order. So, it doesn't – our backlog doesn't go out as far as you might think. So I'll start with that and then I'll turn it over to Andrew for the first part of your question. |
1,436 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Yeah. And Dave, your fact on the implied order rate is correct. Yes, the implied orders are up year-over-year. Obviously, that is one of the factors which gives us confidence as we look out and also relative strength of the backlog gives us a lot of confidence within the business lines where they are. As regards to backlog, obviously most of the increase has been in E&T as you would expect, given that those are the businesses now which is showing more strength relatively versus CI and RI, and that just is reflected in that order positioning as we go out.
Operator: We'll go next to Rob Wertheimer at Melius Research.
Rob Wertheimer: Hi. My question is around CAT's capabilities in Power Gen and data centers and so forth and how that may or may not be changing with the rise of AI and kind of massive increases in scale of data centers. I guess specifically, I understand that your investment in large research is probably partially targeted at that. My impression is that historically, solar turbines were more combined heat and power in Power Gen. I don't know whether they've served the data center market. I'm curious as to whether you now have an opportunity as those data centers are bigger to sell turbines into it and just your general sense of how the world is changing. Thank you. |
1,437 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Jim Umpleby: Thank you, Rob. We are very excited about what we view as a secular growth opportunity around data centers, both in terms of increasing base power loads, but also the specific opportunities to serve those data centers. So as you probably know, traditionally we have provided reciprocating generative sets as backup for those data centers. But what you say is very correct. That business is changing, and I believe that we are uniquely positioned, because we have a combination of both gas turbines and research that burn a whole variety of fuels. And so we have had some projects now where we've shipped gas turbines, to provide prime power for data centers, because in some places when data centers want to go into a geographic area, the utility can't handle the load of those, and when in fact there's natural gas available, we've seen situations where a customer will take gas turbines, install those, burn natural gas to produce their own base power for the data centers. In addition to that then, there's also the reciprocating engine gen sets as backup if something were to happen. But typically again, we are seeing a change, you are right. The market's changing, and we're very excited about that opportunity.
Operator: We'll move to our next question from Chad Dillard at Bernstein.
Chad Dillard: Hi. Good morning, guys.
Jim Umpleby: Good morning, Chad.
Chad Dillard: So, good morning. So, my question for you is on E&T. Just trying to understand, where the lead times or what the lead times are, specifically in Power Gen. And then, just like how long it will take to get your capacity expansion online, and just how to think about, just like when you can actually ramp the revenues there. |
1,438 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Jim Umpleby: Yeah. So, we're starting to make – again, we started to make those capacity investments, and those – that capacity is expected to ramp up over the next four years, so it's gradually phased in. So that'll happen over a four-year period. In terms of E&T, obviously I mentioned that Solar Turbines has strong quotation and order activity as well, and they have the ability certainly to increase their production. So again, the capacity in large engines, the investment that we specifically mentioned, is expected to gradually phase up over the next four years.
Andrew Bonfield: Yeah, and just a quick point to make. Obviously Power Gen is the fastest-growing business today within energy and transportation, just to note. And actually, as a percentage of E&T sales, it has gone up from 25% in the first quarter of last year to 29% this year. So it is an area of exciting opportunity, even before we build the capacity, and obviously an area where there's potential for further growth as well.
Jim Umpleby: And maybe just one add-on. You know one of the beauties about our business model – we're making this capacity investment in large engines, but those large engines just don't have the ability to serve the power generation market. I mean they serve a whole variety of markets, so those same large engines are used for oil and gas. They are used for large mining trucks. They are used for data center backup. But we also believe there's an opportunity over time for distributed generation as well. So again, we're making this capital investment not just based on one opportunity in the marketplace, but upon multiple opportunities in different industries. And again, we think that diversity of our end-market opportunities is one that really makes this an excellent investment.
Operator: And we'll move to our next question from Jerry Revich at Goldman Sachs.
Jerry Revich: Yes, hi. Good morning, everyone.
Jim Umpleby: Good morning, Jerry. |
1,439 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Jerry Revich: Yes, hi. Good morning, everyone.
Jim Umpleby: Good morning, Jerry.
Jerry Revich: Jim, Andrew, I'm wondering if you could just talk about in construction industries, in prior cycles the industry has passed through lower input costs in terms of lower prices to customers when input costs have declined. In the first quarter we saw a nice price cost spread on the positive side for you folks here. I'm wondering to what extent do you think for you folks in the industry, could we see that price cost gap continue to widen since the industry has taken a more disciplined approach in cutting production sooner relative to the soft spot that you mentioned in your prepared remarks?
Andrew Bonfield: Yes. So Jerry, as we've indicated, obviously price has been favorable, but we expect the benefit of favorable price to moderate as the year progresses and that obviously holds true for CI as it does for the other segments. And that really will obviously mean that the benefits on margin expansion will become much, much tougher for CI, as particularly as you get into the second half of the year where you won't see that spread. We do see manufacturing costs being broadly flattish, and part of the reason for that is because of the favorability of freight, which is more than offsetting the impact of cost absorption. So overall, we've obviously taken the approach that where we have got the benefit of price, we will obviously be trying to hold that as best as we can obviously. And we've been, as you rightly pointed out, we’ve been pretty disciplined about making sure that we have cut production, like for example in the excavators that you saw in the fourth quarter, where we do see softness or weakness in the market.
Operator: We'll take our next question from Stephen Volkmann at Jefferies. |
1,440 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll take our next question from Stephen Volkmann at Jefferies.
Stephen Volkmann: Great. Good morning, guys. I'm wondering if we could tack back to the dealer inventory commentary. I want to make sure I understand that right, because that seems to be a bit of a focus for the market this morning. I think if I'm not mistaken, that the dealers did build a little more than you expected in the first quarter. I'm curious why that might be. And if you can provide some sense of how much of that total 1.4 kind of has a customer name on it, and I guess the bottom line is, why don't you worry that that's kind of an inventory build that sort of makes things less bullish going forward? Thank you.
Jim Umpleby: The reason the dealer inventory increased a bit more than we expected is primarily due to the softness in European construction. It was – that really is the reason for that, that build in dealer inventory. The dealer inventory is well within our typical range, comfortably within what we consider a typical range. So we are not concerned about it.
Andrew Bonfield: And just the other bit of granularity which we tried to give and just is about spilling out between machine and dealer inventory and dealer inventory as a whole. Principally because obviously in energy and transportation, it is that most of that inventory as we said previously, and also within resource industries, over 70% of that is backed by firm customer orders. It's not really inventory sitting on a dealer's lot waiting. Often it's a city getting ready for commissioning, and that is part of the reason for that. Overall, as Jim reiterated and just to reiterate, we are comfortably within the range on machine dealer inventory. We do expect for the year that inventory level to be about flat year-over-year. That's our expectation and then planning assumption at the moment.
Operator: We'll move to our next question from Mig Dobre at Baird.
Mig Dobre: Yes, thank you. Good morning.
Jim Umpleby: Hi, Meg. |
1,441 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Mig Dobre: Yes, thank you. Good morning.
Jim Umpleby: Hi, Meg.
Mig Dobre: Hi. Maybe we can talk a little bit about resource industries. I guess one of the things that stood out to me was the pretty significant decline in dealer deliveries in this segment, and I'm curious in mining specifically, what's going on there? Are you actually starting to see maybe a pullback in demand from your customers? Is the investment cycle maturing there or is this just sort of a temporary aberration?
Jim Umpleby: Yeah, so we had expected some softness certainly in RI this year and we talked about that, I believe in our first quarter call, so a number of things. First of all, on the positive side, the number of parked trucks, and there's some indices that we look at to really judge the health of the mining industry and so some positives. The number of parked trucks is relatively low. The utilization of our customers’ products, of our products by our customers is high, and the age of the fleet is relatively elevated, so those are positive things. Having said that, our customers are displaying capital discipline. Not surprising, just given what's happened in the economic conditions around the world, but those indices really do bode well for us. In addition to that, we've seen great strength, great acceptance of our autonomous solutions. So those have been accepted well also. We expect a robust rebuild activity this year, because our products are being used so extensively by our customers. So again, really, I think it's just really mostly a function of a bit of a dealer inventory change and also our customers displaying capital discipline. |
1,442 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Yeah, and just to add to that a little bit, just to remind you that the first quarter of 2023 was very strong and actually the highest level of STUs in resource industries for over 10 years at the time. So that was a significant factor. Secondly, as we talked about, there are two product lines, where because of supply chain there was a backlog which was used up principally in 2023, off-highway trucks and also articulated trucks. Just as an FYI, large mining trucks are still growing, which I know is one of the factors that many of you look at. So there was no issue there at all with regards to that.
A - Jim Umpleby: And again, you think about just the market changing, we're still very bullish on the fact longer term that we believe the energy transition will support increased commodity demand over time. That'll expand our total addressable market and provide us further opportunities for long-term profitable growth. Just think about everything that has to happen for EVs. There's no way around that being accomplished without our customers producing more commodities, and of course, they use our products to produce those additional commodities.
Operator: We'll go next to Angel Castillo at Morgan Stanley.
Angel Castillo: Hi, good morning and thanks for taking my question. Just wanted to clarify, going back to North America CI in the second quarter, you talked about seeing continued kind of healthy demand there. But just wanted to clarify, as we think about kind of dealer inventories coming down in the second quarter, and you also have a little bit of tougher comps there as you think about retail sales. When we kind of look at retail sales for the second quarter of this year, just to clarify, is that expected to be still positive or do you expect that to turn kind of modestly negative? And as you kind of talk about that and provide more color on that, could you also talk about what you are seeing in April, in terms of kind of quarter-to-date trends in retail sales? |
1,443 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Yeah, as I think we've indicated overall, for the full year, we expect CI revenues to be, STUs to be slightly negative for the full year. The first quarter, in January we said we thought they would be about flat for the full year. So that does imply some acceleration through the year in order to get back to that sort of – to be just slightly negative. With regards to trends in April, look we're not going to talk about what's happening. I mean, as is always the case, quarter-on-quarter you see changes, which can relate to commissioning and all sorts of number of factors, but we're comfortable with that full year forecast for CI.
A - Jim Umpleby: And North America is our strongest, largest geographic area for CI. And as we said earlier, we certainly expect demand in North America to remain healthy. We've got – we expect it to be flat to slightly higher in non-residential, flat to slightly down. So again, in that North American market, which is so important to us, business continues to be strong.
Operator: Our next question comes from Kristen Owen at Oppenheimer.
Kristen Owen: Great. Thank you for taking the question. I wanted to ask about capital allocation here, just given the ASR that you put in place. You've bought back more shares than historically you do in a year. I appreciate that that is in line with the ME&T free cash flow deployment, but your stock is also at all-time highs. So just wondering how we should think about intrinsic value at this stage and how to weigh that ASR versus, say, dividend increase. |
1,444 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Yeah. So obviously as you know, we have both a dividend policy as well as a share buyback policy. As far as the dividend is concerned, we have one more year of our high single digits. That's a board decision which will probably be made around June time, and then after that we'll probably come back and look at what the future policy will be. Remember, the objective is to pay out no more than 60% to 65% of free cash flow in a low environment for the dividend. So that will be part of our – that comes into part of the policy and the way we look at that. With regards to intrinsic value, obviously as is always the case, yes, we do take into account intrinsic value, and that decision has been made as part of the longer term ASR, obviously. But remind you that the benefit of the ASR is really around the fact that you are in the market more consistently. We don't try and market time. We are really just trying to be in the market consistently to return that cash to shareholders. Overall, we believe that's the best approach, but we're very comfortable with putting that in place. Audra, we have time for one more question.
Operator: Thank you. That question comes from Nicole DeBlase at Deutsche Bank.
Nicole DeBlase: Yeah, thanks. Good morning, guys. I also wanted to focus on CI. So a lot of discussion obviously about Europe kind of being the problem child this quarter. I guess, are you guys seeing as you kind of progress through the quarter, some signs of stabilization or is there risk that Europe could still get worse? And then I guess also like, with dealer inventories being up and not being the driver, are you concerned about the level of dealer inventories in Europe CI specifically? Thank you. |
1,445 | CAT | 1 | 2,024 | 2024-04-25 08:30:00 | Caterpillar Inc. | 259,378 | Jim Umpleby: Yeah, firstly, as I mentioned earlier, we believe that dealer inventory is comfortably within what we would consider the typical range. When we think about EAME, we talked about construction weakness in Europe, but also there's strength in the Middle East, a lot of construction activity in the Middle East. So again, that provides a bit of a buffer there to the total EAME region. And again, I keep coming back to North America as our largest, most important region for CI and the fact that non-residential construction is underpinned by those government infrastructure projects, which again is a very positive thing for us. So I think it's an important thing to keep in mind as you think about CI.
Jim Umpleby: All right. Well again, thank you for joining us and we certainly appreciate all your questions. I'd like to just close by thanking our global team for their strong performance in the first quarter, including higher adjusted operating profit margin, record adjusted profit per share and strong EM&T free cash flow. Our strong results continue to reflect the diversity of our end markets, as well as the disciplined execution of our strategy for long term profitable growth. With that, I'll turn it back to Ryan.
Ryan Fiedler : Thanks Jim, Andrew, and everyone who joined us today. A replay of our call will be available online later this morning. We'll also post a transcript on our Investor Relations website as soon as it's available. You'll also find our first quarter results video with our CFO and an SEC filing with our sales to users data. Click on investors.caterpillar.com and then click on financials to view those materials. If you have any questions, please reach out to Rob or me. Now let's turn the call back to Audra to conclude our call.
Operator: Thank you. And that does conclude our call. Thank you for joining. You may all now disconnect. |
1,446 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Operator: Welcome to the First Quarter 2025 Caterpillar Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alex Kapper. Thank you. Please go ahead. |
1,447 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Alex Kapper: Thank you, Audra. Good morning, everyone, and welcome to Caterpillar's first quarter of 2025 earnings call. I'm Alex Kapper, Vice President of Investor Relations. Joining me today are Jim Umpleby, Chairman and CEO; Joe Creed, Chief Operating Officer and incoming CEO; Andrew Bonfield, Chief Financial Officer; Kyle Epley, Senior Vice President of the Global Finance Services Division; and Rob Rengel, Senior Director of Investor Relations. During our call, we'll be discussing the first quarter earnings release we issued earlier today. You can find our slides the news release and a webcast replay at investors.caterpillar.com under Events & Presentations. The content of this call is protected by US and international copyright law. Any rebroadcast, retransmission, reproduction or distribution -- or part of this content without Caterpillar's prior written permission is prohibited. Moving to Slide 2. During our call today, we'll make forward-looking statements, which are subject to risks and uncertainties. We'll also make assumptions that could cause our actual results to be different than the information we're sharing with you on this call. Please refer to our recent SEC filings and the forward-looking statements reminder in the news release for details on factors that individually or in aggregate could cause our actual results to vary materially from our forecast. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. On today's call, we'll also refer to non-GAAP numbers. For a reconciliation of any non-GAAP numbers to the appropriate U.S. GAAP numbers, please see the appendix of the earnings call slides. I'd like to advance to Slide 3 and turn the call over to Chairman and CEO, Jim Umpleby. |
1,448 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Jim Umpleby: Thanks, Alex. Good morning, everyone. Thank you for joining us. Since the beginning of the year, we have been celebrating our centennial at facilities and trade shows around the world. Earlier this month, we commemorated Caterpillar's founding on April 15 by hosting events across the company, and I had the honor of bringing opening bell at the New York Stock Exchange surrounded by all living and past CEOs of Caterpillar. It was a historic celebration. On the same day, we also announced that Joe Creed will succeed me as CEO tomorrow, May 1. The announcement followed a multiyear succession planning process by Caterpillar's Board of Directors. I have great confidence in Joe and the rest of the executive office to lead Caterpillar going forward. It's been a great honor and privilege to serve as Chairman and CEO for the past eight years, and I look forward to my new role as Executive Chairman. Now moving to Slide 4. I want to thank our global team for another quarter of solid results, which reflect the benefit of the diversity of our end markets and the disciplined execution of our strategy for long-term profitable growth. Although sales were broadly in line with our expectations when excluding the negative impact from currency, we delivered adjusted operating profit and adjusted operating profit margin above our expectations. Very strong order rates resulted in backlog growth of $5 billion, an all-time record for organic backlog growth in a quarter. The backlog increased for all segments and was led by Energy & Transportation. Our strong balance sheet allowed us to deploy over $4 billion to shareholders through share repurchases and dividends during the quarter. As you know, the current environment is dynamic, and we will discuss the potential impacts to 2025 in a moment. But to start, I'll share my perspectives about this quarter's performance. Joe will then discuss the second quarter outlook and our full year scenarios. Finally, Andrew will provide a detailed overview of results and key assumptions |
1,449 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | quarter outlook and our full year scenarios. Finally, Andrew will provide a detailed overview of results and key assumptions looking forward. For the first quarter, sales and revenues were down 10% versus last year. The sales decrease was primarily due to lower sales volume and an unfavorable price realization versus the first quarter of 2024. Lower sales volume was primarily driven by the impact from changes in dealer inventories. Total dealer inventory increased by about $100 million in the first quarter of 2025, compared to about $1.4 billion in the first quarter of 2024. Machine sales to users were stronger than we expected in the first quarter, resulting in flat machine dealer inventory versus our expectation for growth in dealer inventory during the quarter. First quarter adjusted operating profit margin was 18.3%, above our expectations, primarily due to favorable manufacturing costs. We achieved quarterly adjusted profit per share of $4.25. Turning to Slide 5. As I mentioned earlier, sales and revenues declined 10% in the first quarter to $14.2 billion. Compared to the first quarter of 2024, machine sales to users, which includes Construction Industries and Resource Industries, declined by 1%, but were better than our expectations. Energy & Transportation continues to grow as sales to users increased 13%, driven primarily by power generation. Sales to users in Construction Industries were up 3% year-over-year. In North America, sales to users were slightly higher than the prior year and better than we expected. Growth in sales to users for residential construction more than offset a slight decline in non-residential and lower rental fleet loading. Rental fleet loading was in line with our expectations, and dealers' rental revenue continued to grow in the quarter. Sales to users increased in the EAME driven by better-than-expected sales to users in Africa and the Middle East. In Asia-Pacific, sales to users declined, in line with our expectations. Sales to users in Latin America continue to grow and at a |
1,450 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Asia-Pacific, sales to users declined, in line with our expectations. Sales to users in Latin America continue to grow and at a higher rate than anticipated. In Resource Industries, sales to users declined 10%, which was better than we expected. Mining as well as heavy construction and quarry and aggregates were both better than expected, primarily due to off-highway trucks placed into service sooner than anticipated. In Energy & Transportation, sales to users increased by 13%. Power generation sales to users grew significantly by 58%, primarily due to demand for reciprocating engines for data center applications. Turbines and turbine-related services for power generation also grew. Sales to users of reciprocating engines declined in oil and gas applications due to softness in well servicing. Turbines and turbine-related services for oil gas declined due to a difficult comparison versus the first quarter of 2024 and some delay in timing of deliveries in the first quarter of 2025. Transportation sales to users increased and industrial sales to users grew slightly from a relatively low level. Moving to dealer inventory and our backlog. In total, dealer inventory increased by approximately $100 million versus the fourth quarter of 2024. Machine dealer inventory was about flat and grew less than we had anticipated due to better-than-expected machine sales to users in Construction Industries and Resource Industries. As I mentioned, backlog increased versus year-end 2024 by $5 billion or 17%, driven by strong order rates in all three of our primary segments. Our backlog of $35 billion is a record. Moving to Slide 6. We generated ME&T free cash flow of $200 million in the first quarter. The decline versus last year is primarily due to lower profit. We deployed $4.3 billion to shareholders through nearly $3.7 billion of share repurchases and about $700 million of dividends paid. We remain proud of our Dividend Aristocrat status, as we have paid higher annual dividends for 31 consecutive years. We continue to expect to |
1,451 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | of our Dividend Aristocrat status, as we have paid higher annual dividends for 31 consecutive years. We continue to expect to return substantially all ME&T free cash flow to shareholders over time through dividends and share repurchases. Now I'll turn it over to Joe. |
1,452 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Joe Creed: All right. Thank you, Jim, and good morning, everyone. I'll start today with a discussion of our second quarter outlook and a range of scenarios for the full year for discussing our end markets. The first quarter ended with positive momentum after another quarter of better-than-expected sales to users and record organic growth in our backlog. However, the potential impact of tariffs has increased uncertainty and the situation remains fluid. I'll start with our expectations for the second quarter where we have the best visibility and then cover the full year. Based on our current view, we anticipate sales in the second quarter to be similar to prior year. Sales growth in Energy & Transportation will be offset by lower machine sales in both Resource Industries and Construction Industries, primarily driven by unfavorable price, while volume is expected to be about flat. We expect lower enterprise adjusted operating profit margins versus the prior year without the additional headwind of tariffs, primarily due to lower price realization. Additionally, for the second quarter, the tariffs which have been announced and implemented this year are currently estimated to be a cost headwind of about $250 million to $350 million. This estimate is net of our initial mitigation efforts and cost controls, which represent limited short-term actions that we were able to implement quickly. As you would expect, we are evaluating a broad range of longer-term mitigation actions. Many of these actions require more time to implement are more difficult to reverse and, therefore, require more clarity and certainty on the long-term environment around tariffs. As I mentioned, the situation remains fluid, and we will continue to monitor it closely. Throughout our history, we've demonstrated the ability to navigate many different environments. I'm confident we're well positioned to manage the impact of tariffs over time. Caterpillar is a global company and we have manufacturing locations around the world. Our largest manufacturing |
1,453 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | over time. Caterpillar is a global company and we have manufacturing locations around the world. Our largest manufacturing base is in the United States, where we employ over 50,000 full-time employees. And we continue to be a net exporter. Caterpillar's business is resilient due to the diversity of our portfolio and the end markets we serve. Moving on to the full year. I remain cautiously optimistic based on how we finished the first quarter. As Jim mentioned, machine sales to users in the first quarter were better than expected, especially in Construction Industries. This is a continuation of the positive momentum we saw at the end of last year and evidence that the merchandising programs we put in place are yielding results. I'm also pleased with the continued growth in power generation as well as the first quarter order intake in all three segments, which led to record organic growth in our backlog. As a result, in pre-tariff scenario, which does not include any impact from tariffs, we would have expected full year 2025 sales and revenues to be about flat versus 2024. This would represent a slight improvement since our outlook last quarter. In this scenario, we would also expect adjusted operating profit margins to be in the top half of the target margin range based on the corresponding level of sales and revenues. ME&T free cash flow would also be in the top half of the $5 billion to $10 billion target range. However, due to the tariff announcements and increasing economic uncertainty, we have evaluated a variety of scenarios to estimate the potential impact on our results for the remainder of the year. In the event we see negative economic growth in the second half of the year, we would expect full year 2025 sales and revenues to only be down slightly versus 2024. This expectation is a reflection of the diversity of our end markets and the strength our record backlog, especially for large engines and solar turbines where we have line of sight to production for the remainder of 2025. Before considering |
1,454 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | for large engines and solar turbines where we have line of sight to production for the remainder of 2025. Before considering additional mitigating actions we might take and assuming the tariffs in place today remain for the duration of 2025, we would still expect to be in the target margin range for adjusted operating profit as well as in the ME&T free cash flow target range for the year. Andrew will provide more details on key assumptions for the second quarter and full year in a moment. To further support our range of scenarios, I'll now share the latest view of our end markets based on current conditions. Starting with Construction Industries. As I said earlier, we are encouraged by another quarter of better than expected sales to users and strong order rates across many of our regions as customers are responding to the attractive rates offered through Cat Financial. In North America, overall construction spending remains at healthy levels and infrastructure projects funded by the IIJA continue to be awarded. Sales to users in residential construction and dealer rental revenues continue to show growth. China has shown positive momentum in the 10-ton and above excavator industry, but from a very low level of activity. In Asia Pacific outside of China, economic conditions continue to be soft. In the EAME, weak economic conditions in Europe remain, while conditions are supportive of investment in Africa and the Middle East. Construction activity in Latin America is expected to decline moderately throughout the year. Moving on to Resource Industries. We are starting the year with strong order rates and backlog growth, particularly for large mining trucks. Rebuild activity is expected to remain healthy. Although most key commodities remain above investment thresholds, customers continue to display capital discipline. Customer product utilization remains high and the age of the fleet remains elevated. We also continue to see growing customer acceptance of our autonomous solutions. We believe the evolving energy |
1,455 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | elevated. We also continue to see growing customer acceptance of our autonomous solutions. We believe the evolving energy landscape will support increased commodity demand over time, providing further opportunities for long-term profitable growth. And finally, in Energy & Transportation. The growth in backlog was driven by robust order activity in both oil and gas and power generation. Demand remains strong in power generation for both Cat reciprocating engines and solar turbines. Our ongoing discussions with data center customers give us confidence in our long-term outlook. We are focused on operational improvements to deliver orders today while increasing our large engine output capabilities through the previously announced multiyear capacity investment. For oil and gas reciprocating engines and services, we expect continuing softness in well servicing due to ongoing capital discipline by our customers, industry consolidation and efficiency improvements in our customers' operations. We do see positive momentum, however, in gas compression. As we previously mentioned, we can leverage our large engine platforms across a variety of applications. Based on current market conditions and well servicing applications, we are able to serve additional power generation and gas compression demand while meeting customer needs. Solar turbines oil and gas backlog remains strong, and we continue to see healthy order and inquiry activity. Demand for products in industrial applications is expected to remain at a relatively low level, while transportation remains stable. With that, I'll turn it over to Andrew for a detailed overview of results and key assumptions looking forward. |
1,456 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Thank you, Joe, and good morning, everyone. I'll begin with a summary of the first quarter and then provide more detailed comments, including some on the performance of segments. Next I'll discuss the balance sheet and free cash flow, before concluding with comments on our current assumptions for the full year as well as our expectations for the second quarter. Beginning on slide 8. Sales and revenues, revenues were $14.2 billion, a 10% decrease versus the prior year. Adjusted operating profit was $2.6 billion, and our adjusted operating profit margin was 18.3%. Both were slightly better than we had anticipated. Profit per share was $4.20 in the first quarter, compared to $5.75 in the first quarter of last year. Adjusted profit per share was $4.25, compared to $5.60 last year. Adjusted profit per share excludes restructuring costs of $0.05 in the quarter. Other income and expense was unfavorable versus the prior year by $49 million, primarily driven by unfavorable foreign currency impacts. Excluding discrete items, the estimated annual effective global tax rate was 23%. The year-over-year impact from the reduction in the average number of shares outstanding, primarily due to share repurchases, resulted in a favorable impact on adjusted profit per share of approximately $0.17. Moving to Slide 9, I'll discuss our top line results for the first quarter. Sales and revenues decreased by 10% compared to the prior year, primarily impacted by lower sales volume. Lower volume was mainly driven by the impact from changes in dealer inventories. In addition, price realization and currency were unfavorable year-over-year. Sales were broadly in line with our expectations, if you exclude the impacts of currency movements, which we do not anticipate. The net sales impact of better-than-expected machine sales to users and the lower-than-anticipated machine dealer inventory was about neutral. Price realization was also about in line with our expectations. Moving to operating profit on slide 10. Operating profit |
1,457 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Price realization was also about in line with our expectations. Moving to operating profit on slide 10. Operating profit in the first quarter decreased by 27% to $2.6 billion. Adjusted operating profit decreased by 26% to $2.6 billion, mainly due to the profit impact of lower sales volume and unfavorable price realization. The adjusted operating profit margin was 18.3%, a 390 basis point decrease versus the prior year. This is better than we had anticipated, mainly due to favorable manufacturing costs, including freight, and cost absorption impacted by higher inventory levels in the quarter. On Slide 11, I'll review the performance of the segments, starting with Construction Industries. Sales decreased by 19% in the first quarter to $5.2 billion, slightly below our expectations, due to unfavorable price realization and currency impacts. Price realization was more unfavorable than we had anticipated, mainly due to the higher-than-expected volume of sales to users. Compared prior year, the 19% sales decrease was primarily due to lower sales volume and unfavorable price realization. The decrease in sales volume was mainly driven by the impact from changes in dealer inventories. By region, construction industry sales in North America decreased by 24%. In Latin America, sales decreased by 15%. Sales in the EAME region decreased by 13%. In Asia Pacific, sales decreased by 12%. First quarter profit for Construction Industries was $1.0 billion, a 42% decrease versus the prior year. This decrease was mainly due to the profit impact of lower sales volume and unfavorable price realization. The segment's margin of 19.8% was a decrease of 770 basis points versus the prior year. The margin was slightly stronger than we had expected, mainly due to the lower-than-anticipated manufacturing costs and lower-than-expected SG&A and R&D expenses. Price realization was slightly unfavorable compared to our expectations and acted as a partial offset. Turning to Slide 12. Resource Industries sales decreased by 10% in the first quarter to |
1,458 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | and acted as a partial offset. Turning to Slide 12. Resource Industries sales decreased by 10% in the first quarter to $2.9 billion. Sales were slightly higher than we expected on stronger-than-anticipated sales to users, which benefited from the timing of deliveries of off-highway trucks. As we compare to the prior year, the 10% sales decrease was primarily due to lower sales volume, unfavorable price realization and currency impacts. Lower sales to users drove the sales volume decline. First quarter profit for Resource Industries decreased by 18% versus the prior year to $599 million. This was mainly due to the profit impact of lower sales volume. The segment's margin of 20.8% was a decrease of 210 basis points versus the prior year. Margin was stronger than we had anticipated due to better-than-expected volume, price realization and manufacturing costs. Now on Slide 13. Energy & Transportation sales of $6.6 billion decreased by 2% versus the prior year. Sales were slightly below our expectations due to volume as a result of a delay in an expected delivery and unfavorable currency impacts. The sales decrease versus the prior year was mainly due to lower sales volume and unfavorable currency impacts, partially offset by favorable price realization. By application, power generation sales increased by 23%, industrial sales decreased by 2%, transportation sales were lower by 10%, and oil gas sales decreased by 20%. First quarter profit for Energy & Transportation increased by 1% versus the prior year to $1.3 billion. The slight increase was primarily due to favorable price realization, mostly offset by the profit impact of lower sales volume and unfavorable manufacturing costs. The segment's margin of 20% was an increase of 50 basis points versus the prior year. This was slightly stronger than we had anticipated, primarily due to favorable cost absorption and price realization, partly offset by the lower-than-expected volume. Moving to Slide 14. Financial Products revenues increased by 2% versus the prior year to |
1,459 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | by the lower-than-expected volume. Moving to Slide 14. Financial Products revenues increased by 2% versus the prior year to over $1 billion, primarily due to higher average earning assets in North America, partially offset by lower average financing rates also in North America. Segment profit decreased by 27% to $215 million. The decrease was mainly due to the absence of a favorable insurance settlement that occurred in the prior year and higher provisions for credit losses. The increase in the provision reflected the absence of a non-recurring reserve release in the prior year and a specific reserve related to a single customer that was provided in the current quarter. Our customers' financial health remains strong. Past dues were 1.58% in the quarter, down 20 basis points versus the prior year, the lowest first quarter since 2006. The allowance rate was 0.95%, remaining near historic lows. Business activity at Cat Financial remains healthy. Retail credit applications increased by 13% and retail new business volume grew by 8% versus the prior year, with increases in all regions. This reflects the attractiveness of our sales merchandising programs. In addition, used equipment inventory levels remain low and conversion rates remain above historical averages as customers choose to buy their equipment at the end of their lease term. Moving on to Slide 15. ME&T free cash flow was about $200 million in the first quarter. This is about a $1 billion decrease versus the prior year, primarily driven by lower profit. The quarter included our annual payment for 2024 short-term incentive compensation and CapEx spend of about $700 million. We continue to anticipate higher CapEx spend this year, likely to be around $2.5 billion. Moving to capital deployment. We deployed $4.3 billion to shareholders in the first quarter. Nearly $3.7 billion was for share repurchases, which included a $3 billion accelerated share repurchase, or ASR, that may last for up to nine months. The ASR provides us with favorable pricing, which is |
1,460 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | accelerated share repurchase, or ASR, that may last for up to nine months. The ASR provides us with favorable pricing, which is finally determined at an attractive discount to the volume weighted average price, or VWAP, over the full period of the agreement. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $3.6 billion, in addition to $1.2 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Now on Slide 16, let me start with a few comments on the full year. We are closely monitoring the evolving economic conditions. Demand signals were stronger than we had expected in the quarter, including backlog growth across our three primary segments and stronger-than-expected sales to users, particularly in Construction Industries. These indicators boost our confidence in the resilience of the top line this year. As Joe mentioned, our sales expectations would be about flat for the full year in a pre-tariff scenario, which excludes any impact from tariffs. As a reminder, this compares to our prior expectations for slightly lower full year sales than we communicated to you a quarter ago. Also, as Joe noted, we have run a number of scenarios to estimate the full potential impact of tariffs for the remainder of the year. Our alternative scenario also assumes negative economic growth in the second half of 2025. This scenario could result in full year 2025 sales and revenues to be only down slightly versus 2024. This result highlights the resilience of our top line, which is supported by the strength of our backlog and the diversity of our end markets. Now, onto margins. In a pre-tariff scenario, which assumes no impact from tariffs, we would have expected full year margins to remain in the top half of the adjusted operating profit margin range at the expected levels of sales and revenue. We have also assessed potential cost impacts from the current tariffs for the remainder of the year before any additional mitigation actions. Given the |
1,461 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | cost impacts from the current tariffs for the remainder of the year before any additional mitigation actions. Given the uncertainty of what tariff rates could be and the timing of any additional mitigation actions that we may take once the situation becomes clearer, it is not possible to derive an accurate estimate of the net full year impact of tariffs. However, in our alternative scenario, assuming the tariffs in place today remain for the duration of 2025, and without any additional mitigation actions, which is unlikely to happen, we would still expect to remain within the margin target range at the expected levels of sales and revenues. Also, I want to remind you about two important points impacting our year-over-year comparatives. As we said in January, we expect the impact of negative price realization to be greater in the first and second quarters of the year. This will moderate as we move into the second half. In addition, we also do not expect a significant decrease in machine dealer inventory as we saw in the fourth quarter of 2024 and still expect dealers to hold inventories about flat for the full year. These factors help to underpin our confidence about the second half of the year. Moving on, we continue to expect restructuring costs of approximately $150 million to $200 million in 2025, and our anticipated annual effect of global tax rate remains at 23% for 2025 excluding discrete items. Turning to Slide 17. To assist you with your modeling, I'll provide our second quarter assumptions. Based on what we see today, we anticipate second quarter sales will be similar to the prior year as sales growth in Energy & Transportation is offset by lower sales in Construction Industries and Resource Industries. By segment, we anticipate lower sales in Construction Industries in the second quarter versus the prior year, mainly due to lower price, the impact of which is expected to be similar to the headwind we saw in the first quarter of 2025. We expect slightly positive volume to act as a partial offset. In |
1,462 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | similar to the headwind we saw in the first quarter of 2025. We expect slightly positive volume to act as a partial offset. In Resource Industries in the second quarter, we expect lower sales versus the prior year, primarily due to unfavorable price realization, the impact of, which is expected to be larger than we saw in the first quarter of 2025. We also expect a slight decrease in volume. As I mentioned, we anticipate higher sales in Energy & Transportation in the second quarter versus the prior year, driven by continued strength in power generation and in oil and gas driven by solar turbines. We also anticipate favorable price. Now, I'll provide some color on our second quarter margin expectations. Compared to the prior year, excluding any tariff impacts, we would have expected margins to be lower than the prior year, primarily due to a net headwind from price realization and some unfavorable manufacturing costs and SG&A and R&D increases. In addition, as Joe mentioned, tariffs will represent a net headwind of about $250 million to $350 million for the quarter. I'll make a few comments regarding our segment margin expectations as well. In the second quarter, in Construction Industries, excluding any tariff impacts, we would have expected lower margins compared to the prior year where the strong prior year margins make for a challenging comparison. The main driver of lower margins year-over-year is unfavorable price. While lower than the comparative quarter last year, we would have expected margins to be higher when compared to the first quarter of this year. Now taking tariffs into account, we would expect about 50% of the second quarter net tariff -- enterprise tariff impact of $250 million to $350 million to be incurred in Construction Industries. In Resource Industries, similar to Construction Industries, a strong prior year margin sets a challenging comparison in the second quarter. Excluding any tariff impacts, we would have expected lower margins versus the prior year, primarily due to unfavorable |
1,463 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | quarter. Excluding any tariff impacts, we would have expected lower margins versus the prior year, primarily due to unfavorable price, which I commented on a moment ago, and higher SG&A and R&D costs. In addition, Resource Industries will be expected to incur an additional headwind of about 25% of the net tariff quarters -- tariff costs in the second quarter. In Energy & Transportation, excluding any tariff impacts, we would have expected slightly higher margins compared to the prior year with favorable volume and price realization, partially offset by manufacturing costs and SG&A and R&D increases. For Energy & Transportation, we would be expected to incur an additional headwind of about 25% of the net tariff costs in the second quarter. So turning to slide 18, let me summarize. Despite the evolving environment, we would expect the range of sales will be flattish to slightly lower as we -- and we currently expect to be comfortably within our target ranges for adjusted operating profit margins and ME&T free cash flow. Business activity and customer financial health remains resilient, while our balance sheet and liquidity positions are strong. We continue to reward our shareholders deploying $4.3 billion of cash in the quarter. We continue to execute our strategy for long-term profitable growth. And with that, we'll take your questions. |
1,464 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Operator: Thank you. We will now begin the question-and-answer session [Operator Instructions] Your first question comes from Michael Feniger at Bank of America.
Michael Feniger: Good morning, everyone. Thanks for having me on. Just the cost headwind of the $250 million to $350 million you guys identified in Q2, just what are you evaluating in terms of the mitigation as you move through the year? Can we see pricing or cost reduction that can fully offset that as we move through the year? And is there anything you're seeing in the environment right now in terms of surcharges or price increases as we look at the competitive environment where you guys are positioned in terms of your manufacturing footprint versus maybe other OEMs and brands that might have more imports. So just kind of wondering how you're looking at that cost headwind, and if we're thinking about pricing as you move to the back half as a lever to mitigate that as we move through the year. Thanks everyone. |
1,465 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Joe Creed: Good morning, Mike, this is Joe. Maybe I'll take a shot at that, and others can chime in here. There's a lot to unpack in that question. As far as the second quarter goes, as I mentioned in prepared remarks, we have taken a number of short-term actions, things that we would call no-regrets type of actions that we can be pretty nimble with. Examples of those would be obviously some short-term cost reductions. We'll have a look at our overhead costs, things that would fall into the belt tightening situation. So cutting back on travel, discretionary spending. We're able to slow some inbound shipments for certain products. Keep in mind, and many you know this, we have 3.5 months of sales of dealer inventory on the ground for most products. And in some products, we have more. So by slowing down those shipments, it gives us time to see how this fluid situation plays out. And during COVID, we've been -- since COVID, we've been working on making our supply chain more resilient and adding some dual sourcing where we can. That's, I would say, a fairly limited opportunity for us, but where we have the opportunity and that benefits us, we're taking advantage of that. We need to see, obviously, in this fluid situation where it shakes out. Some of the longer-term things that we would consider here require investments. They take time to implement and they're very difficult to change or pivot from once we do that. Those types of things like moving -- significantly moving sourcing or supply chains, we really need to see the amount of the tariff. It's going to depend on the product, the situation, where it's coming from, which market we're talking about. When we move sourcing on components, particularly critical components, it requires a lot of testing and validation to make sure it meets the Caterpillar quality and durability specs. So those take time. And so we would obviously look throughout the year at potentially deeper cost reductions, depending on how this plays out. My preference is to protect our investments |
1,466 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | the year at potentially deeper cost reductions, depending on how this plays out. My preference is to protect our investments in our funding for items that we think are going to really help our future growth. And then your question on price, there's a lot of things that go into pricing. And so we need to balance that in context with the amount of tariffs that we can't offset with these other mitigating efforts, along with market conditions, our competitive position. And just sort of remind you, our focus here is dollar OPAT growth. The current merchandising programs we put in place last year are yielding really positive results over the last -- starting in the fourth quarter of last year, continued into the first quarter of this year. So any actions we take there, I'm not saying we won't, but we'll have to consider volume impacts with that as well. So it's a fluid situation. I think we would like to see a little more clarity. We're obviously going to take the actions that are required. But we sit in a really good position right now being able to give you the variety of scenarios and feel comfortable we'll be in our target ranges in any of those scenarios, so. |
1,467 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Jim Umpleby: This is Jim. I'd add in, obviously, it's a very dynamic situation depending on what the administration in the end decides to do around tariffs. And so there have been certain statements made by members of the administration on China, for example, that the current – the current tariff levels are not sustainable. And so again, we're cautiously optimistic here that there will be some trade deals struck and that the tariff impact will be lower than it is currently. So again, as Joe mentioned, we're being cautious and prudent here taking into account all factors that we have to keep in mind.
Operator: We'll move to our next question from Rob Wertheimer at Melius Research.
Rob Wertheimer: Just first off, Jim, congratulations to you and really everybody at Cat for a remarkable kind of improvement over the past several years. And Joe, congratulations to you as well, you're taking over in an interesting time. So my question is going to be on construction. Okay. There's lots of cross trend going on with kind of the dealer inventory build being de minimis in contrast to a normal quarter. The price being negative, despite apparently stronger sell-through, and then maybe full year dealer inventory not declining. So there's a lot of back and forth. I wonder if you can put color about what customers and dealers are really feeling. Is there just more optimism out there than you expected and that kind of explains most of it? You would have priced stronger if you thought it was this strong? I mean maybe just talk about how you're managing construction what those cross-trends are. Thank you. |
1,468 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Joe Creed: Yes. Thanks, Rob. I would say those metrics all sort of coincide with each other. We put the merchandising programs in place last year. They're yielding results. We've had multiple quarters in a row of better-than-expected sales to users. Frankly, better than the industry, which is a positive thing. So those are yielding good results. That caused us -- remember, we entered the first quarter with what we felt like was the high side of dealer inventory. So we expected dealer inventory build in the first quarter to be lower than last year, but still have a build. And those higher sales to users caused our dealer inventory to really not have a build in CI. And then also our backlog is going up as a result. So dealers are ordering to replenish and that will also cause our seasonal pattern to be a little bit different. We probably won't have the level of burn-down of dealer inventory in the second half that we saw last year, which gives us confidence in the ranges of sales that we put out there. When it comes to customer sentiment, I think it's the same as everybody. We prefer certainty, but there's cautious optimism, and that's resulted in continuing sales users, trends in dealer ordering. I've been personally with a number of our dealers in North America two weeks ago and then once this week with a handful of them, and they're not -- what they're seeing and saying trends with the information we've given you today. So where we sit right now, I feel like we put ourselves in a really good position to manage our way through the uncertainty.
Operator: We'll go next to Tami Zakaria at JPMorgan.
Tami Zakaria: Hey, good morning. Thanks for taking my question and congrats to Jim on your stellar career at Caterpillar. And congrats to Joe. Big shoes to fill, but who else better than you? So my question is on…
Jim Umpleby: Thank you. |
1,469 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Jim Umpleby: Thank you.
Tami Zakaria: Of course. So my question is on the tariff impact, $250 million to $350 million. I just want to understand, how should we think about this for the remainder of the year as in the back half? Should we just annualize that number for now until this is lapped in the first quarter of next year? Or this is more like 1Q already had some impact, so $250 million and $350 million is the right range for 3Q and also 4Q?
Andrew Bonfield: Yes. So a couple of things, Tami. It's Andrew. First of all, just to remind you that, obviously, not all the tariffs were impacting for the -- will impact for the full quarter. Some of it will be a little bit later. So that is not a full 100% for the full quarter. Secondly, obviously, as we've said, we have not implemented all the mitigating actions we can take. And so hopefully, as time goes on, and we'll keep you updated, as we go through the year, we'll be able to mitigate some of that offset some of the -- that tariff impact as we go through. Finally, also, obviously, we are, as Jim indicated, let's see what the final actually range is, particularly if we do get some deals done. So some of those, for example, around about just over 50% of their tariffs actually come from China. And that obviously is the highest level. And so again, if that gets moderated at some point in time, that will actually mean quite a significant reduction in the cost base for us as well.
Operator: And next, we'll go to Kyle Menges at Citigroup. |
1,470 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Operator: And next, we'll go to Kyle Menges at Citigroup.
Kyle Menges: Thank you. I just wanted to ask a little bit more on pricing within CI and RI particularly for the back half. I mean it sounds like you might be exploring some mitigation on price. So I'm just thinking, like, could we actually see, as we start to lap these merchandising programs, do we actually see within those segments pricing be flat to positive just as you lap the merchandising and then also maybe do some mitigation? And then just could you elaborate on just what you're hearing in the market from just competitors and what they're doing on price so far, especially the international ones that may be seeing -- experiencing more tariff impacts? Thank you.
Joe Creed: Yes. And as I said earlier, this is Joe, what we're seeing in the market, it's obviously a competitive environment. It's going to be different by region. We're happy with the merchandising programs that we put in place and the traction that's gained in better-than-expected sales to users and better orders for us, which will create better sales volume for us. I'm also pleased that it's not just in North America. We saw healthy activity in Africa and the Middle East and in South America as well. So it's a competitive environment and we'll continue to watch it like we always do. And when it comes to pricing decisions, a variety of factors always go into that. And so like I said earlier, I feel like we put ourselves in a really good position to manage our way through this. We'll monitor the situation and then we'll make any adjustments moving forward. |
1,471 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Andrew Bonfield: Yes. And as regards to the phasing of the year, so in our sort of no-tariff scenario, that's basically assuming that there was no price increase in the second half of the year. So effectively though, we start lapping the impact of merchandising programs, which start to come through stronger in the third quarter. There will still be some impact the third quarter, moderating from where we are currently. And obviously, as we move into the fourth quarter, we'll get year-on-year about the same. As far as the alternative case, we have not assumed any price increases at this point in time because, as we said, that is not with no mitigation whatsoever. Obviously, it's going to be somewhere between the two as we go through. Obviously, at this stage, as Joe indicated, we're not taking action until we actually get more clarity obviously, and then we'll have to weigh those pricing decisions up against what we see from a volume perspective and our competitive situation. So, all of those will be part of that equation.
Joe Creed: Yes. And then I just want to be clear, a lot of that pricing commentary is around CI, which is where I think a lot of the questions are coming. I want to remind everyone, each of our segments and business is in a different position, and we'll make the right appropriate decision for that part of the business.
Operator: We'll move to our next question from David Raso at Evercore ISI. |
1,472 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll move to our next question from David Raso at Evercore ISI.
David Raso: Hi, thank you for the time and obviously, congrats, Joe and Jim. For folks looking at the strong order growth, and skeptical comments about, it's just a pre-buy. But is it true though that you're saying you're not necessarily putting price increases in yet because you're waiting for the tariffs? But is it fair to say that you're not price protecting the backlog? Because I would think if I'm pre-buying, I'm locking in a price, but if I'm putting an order in knowing there is variability on the price, it's a little more reflective of legitimate demand. So, are we price protecting the backlog or not? And also on the mitigation factors, right, you mentioned China is a big impact. But it appears you are moving some orders into the U.S. that were coming from China down to Piracicaba. So, I would think that's already some mitigating factor. So, I'm just trying to think about, is that mitigating factors sort of in the guide, or is that something that's not -- you're not articulating? So, I'm just trying to get a sense of the mitigating factors from the move from China to Brazil. But most importantly, are we price-protecting the backlog of the orders that we got through June -- through March 31st? Thank you. |
1,473 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Joe Creed: Yes. Thanks David. So this is Joe. I would say remind you the two scenarios we gave in the lower scenario, we talked about before any mitigating actions. So, we'll obviously take what actions we can and we'll see how this situation that's very fluid plays out and we'll continue to take the appropriate action. As to the first part of your question, I think there's a few things that I would point out there. I guess the specific answer to your question, in the backlog, depending on the part of the business, sometimes we have contractual arrangements and pricing, if we have frame agreements or solar long orders or certain parts of the business. But generally speaking, we have flexibility on pricing in the backlog. Specifically to your question on the potential of a pre-buy, we've seen no evidence of widespread pre-buying. Our team has been on the ground at Bama. As I mentioned, I have been with North American dealers two times over the last month, and we just haven't seen that. And if you think about our backlog, right, we saw growth in all three segments. Remember, E&T and RI, majority of those orders that are in the backlog are backed by a true customer order. They're not dealer inventory stock. And even in CI, there may be a few customers, right, who will have CapEx budgets and maybe they're trying to push them up in the year, but by and large, if you don't have work, if you're uncertain about having work in the future, you're not probably going to buy a machine to try to get ahead of any sort of pricing. So, again, we don't have any evidence of that right now and feel like we're in a really good position with the growth in our backlog.
Operator: We'll go next to Jamie Cook at Truist Securities. |
1,474 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll go next to Jamie Cook at Truist Securities.
Jamie Cook: Hi, good morning and congratulations, Jim and congratulations, Joe. I guess my question -- long period of time in looking at the margin performance of your company, and down sales an uncertain macro, I mean the margins you put up this quarter and what's implied for the year is fairly impressive and you talked to your backlog and your diversity of earnings. But I guess my longer term question for you is, obviously, you guys have your longer term margin targets that are pegged to a certain revenue level that's there, but I'm wondering, over time, and in particular, Joe, perhaps this could be the story under your leadership, do you think the market under appreciates -- is there a story potentially for Cat where the volatility margins over time should decrease? When we look at your margin target, I guess, the 10% to whatever 20-some percent that over time margins can be within a more narrow range just because of the diversity of the earnings, the operational execution model, the growth in services. I'm just wondering if there's a story there where margins can structurally move higher within a more narrow band? Thank you. |
1,475 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Joe Creed: Thank you. Thanks for setting me up there. What you say is correct, and this is a testament to Jim's leadership the last eight years and the strategy that we all as a team have put in place and continue to execute. We're comfortable with the margin ranges that we have out there. But when you focus on services, why services is such an important part of our strategy, our goal is to dampen some of the cyclicality. We're always going to have cycles in certain parts of the business. We are seeing some tremendous secular trends in power. So the need for power and data centers gives us -- we're at a record backlog, so we have lot more line of sight. We've worked really hard through the O&E model to instill discipline. And so I would expect all of those things to continue. And, obviously, the more we grow, the better shape we're going to be from a margin standpoint.
Andrew Bonfield: Yeah. And Jamie, let me just add, obviously, the range was set based on a 2010 to 2016 timeframe. So that is obviously adjusted one year for inflation. So that's where the bottom end of the range came from. That does not necessarily mean we -- as we've made the business more resilient and the diversity of our end markets, the likelihood of going back to that low end of the range is less likely. So probably the bottom end of that 10% range probably is no longer really valid unless there is some extreme economic scenario where we saw that sort of level sales again. So given everything we've done, services, and also around other segments, I think we're in a lot better position as well.
Operator: We'll move next to Angel Castillo at Morgan Stanley. |
1,476 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll move next to Angel Castillo at Morgan Stanley.
Angel Castillo: Good morning and thanks for taking our question, and Jim, wish all the best. Joe, congrats on the new role. Looking forward to working with you more. Maybe just a little bit of a bigger picture question. With the current market backdrop and just the amount of uncertainty out there, could you just talk about your dealers' rental businesses and maybe what you're seeing more specifically in terms of customers, kind of, rent versus buy decisions? And then just really from a longer term perspective, what does this ultimately mean for your CI business as we think about the potential for growth in that rental vertical versus maybe the potential headwinds either to pricing power or volume as you think about more of a rent versus buy?
Joe Creed: Yeah. What we've seen in the first quarter, I can speak to what we we're seeing right now, right? I mean, dealer rental load was down a little bit. That was expected. So it was in line with what we expected. The dealer rental revenue continued to grow. So we're in a great position to take care of our customers whether they want to rent equipment or whether they want to whether they want to rent equipment or buy equipment. My goal is to make sure they're using Cat equipment. We haven't seen any massive change in that trend. We think rental is a great opportunity for us. So we continue to lean in with our dealer network to have a great rental offering for our customers as we move forward. So I don't have anything really different to report on that front.
Operator: We'll move next to Stephen Volkmann at Jefferies. |
1,477 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Operator: We'll move next to Stephen Volkmann at Jefferies.
Stephen Volkmann: Thank you, guys and my congrats to everyone as well. I wanted to drill down into E&T and power gen specifically. There's been some concerns around sort of what the adoption curve for various data centers, et cetera, is going to be. It sounds like you haven't seen any real change there. But I'm curious if you can comment on that. And then also on the capacity side, are you basically kind of sold out at this point or is there still a little bit more upside in terms of what you can get through the channel? Thank you.
Joe Creed: I would say in this year, we're pretty full on large engines related to the data center standpoint. As I mentioned, well servicing is down a little bit, so we could maybe get a little more power generation orders out because those engine platforms can move between products. We're focused on getting the capacity in. We have direct relationships with all the hyperscalers and other data center -- large data center customers. So we're in constant communication with them. And we're confident in the outlook that we have in front and the need for this capacity. Our goal is to get as much product out to them support their schedules as we can. There's been a lot of some articles going around, but we move schedules around for customers all the time. Aside from doing things like that that we would normally do, we're not seeing any weakness in our plans there. |
1,478 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Jim Umpleby: And maybe just to add in from the solar turbine side, one of the things we're quite encouraged by is that we're seeing strong order and continuing strong -- very inquiry activity to sell our turbine-driven generator sets for prime power for data centers. You'll recall in our Investor Day a few years ago, we talked about the opportunity distributed generation. And of course, in those -- that was a number of years ago and none of us saw the data center opportunity coming as quickly and as significantly as it has. So we're very encouraged by, again, the orders that we've received to provide prime power for those data centers and also the very strong inquiry activity, particularly for our large -- our new larger gas turbine, the Titan 350, which is about 38, 39 megawatts.
Operator: We'll move next to Kristen Owen at Oppenheimer.
Kristen Owen: Good morning. Thank you for the question, and congrats to Jim and Joe both. Understanding that it is difficult to assess at this stage, as we are sort of building out our models and assessing some of those sensitivities, wondering if you can help us unpack some of the bigger moving pieces around your demand deterioration assumptions that are in the back half in your tariff scenario. Just help us understand where you could see more or less of that impact, what could potentially be an opportunity, how that's offset with your backlog, just those big moving pieces around the demand deterioration assumption. Thank you.
Andrew Bonfield: Yeah. So in this scenario, obviously, we've assumed negative economic growth in the second half of the year, which I think actually exceeds what most economists are expecting, and that's globally. So obviously, the most sensitive area, obviously, would be CI. So that would be where most of the sales deterioration would go from a segment perspective. Obviously, there will be a little bit of impact on both RI and E&T, mostly probably driven by levels of activity. But the vast majority would be within CI, would probably be the bulk of it. |
1,479 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Alex Kapper: All right. Audra, we have time for one more question.
Operator: Thank you. Today's final question comes from the line of Jerry Revich from Goldman Sachs.
Jerry Revich: Hi, good morning. A pleasure to send off, Jim, with the last question here. Jim, congratulations on everything the team's done in tripling earnings power over the past eight years, really well done. And Joe, congratulations. Joe, I was hoping to ask you, can you just spend a minute or two just talking about your biggest strategic priorities over the next, call it, two to three years? Obviously, near-term, we're focused on global trade flows. But taking a step back, what are the biggest opportunities that you see going forward and your strategic priorities in the big seat? |
1,480 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Joe Creed: Yes. Thanks, Jerry. Obviously, immediately, we're focused on taking care of our customers and executing our strategy. Maybe just as a reminder of my background, back in 2017 when Jim became CEO and put the strategy in place, I was Senior Vice President of Corporate Finance, which included running our strategy group. So I was part of the core team, along with the executive office to put the strategy that we have today together. I've had the pleasure to execute that strategy over the last six months out in the E&T business. And that strategy has served us well and it's driving good results. And it served us well through some challenging times of COVID and supply chain challenges and other things. So things that we should expect to continue, our focus on services. We have more work to do there to continue to grow services. It's a good thing for our customers. It's a good thing for our dealers and a good thing for us. The only model, I believe, is the right framework for us to look at our business and how we allocate resources to growth opportunities, that's instill a great discipline in our business, which I think has led to the performance in contributed to the margin performance that we have. Our ultimate goal is still going to be growing OPAT dollars. That is what I believe correlates to the best shareholder return over time. Having said that, I'm comfortable with the margin framework as we talked about. And I think the strength of our strategy is helping us there. Cash deployment priorities, I'm committed to those as well. We're a dividend aristocrat, we want to remain that. We'll be consistently in the market with share repurchases. But where I'm really focused is can we accelerate our growth opportunities? And how we're going to put those resources to work and fund the greatest opportunities there? And we have opportunities in all three segments. The last 18 months as Chief Operating Officer, I've been able to spend a lot of time with all the segments and the teams. We've mentioned and you're all |
1,481 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Operating Officer, I've been able to spend a lot of time with all the segments and the teams. We've mentioned and you're all well aware of the opportunities in power generation and demand for power, both distributed generation and data centers. We're going to move a lot of natural gas, I believe. We're well positioned there. The long-term need for minerals is going to really benefit RI. And then the continued need for critical infrastructure around the globe. We have specific opportunities, I think, to accelerate our growth in CI in certain areas, ECP and rental. We'll continue to try to get more adoption of our technology like autonomy and digital capabilities to support our customers. So there's a lot of opportunity over the next few months. We'll continue to look at are there areas that we can really lean in and accelerate the growth in those opportunities, while we obviously manage our way through today's environment. But I have a lot of confidence in our team and the experienced executive office team members that I have. We've worked together for a really long time. We have an amazing team. We have a talented group of Caterpillar employees around the globe and a great global dealer network. So I'm confident we'll be able to deliver great results moving forward. |
1,482 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Joe Creed: So with that, I think that was our last question. Maybe before I pass it to Jim, it's just I want to say it's an honor and true privilege to be named the next CEO of Caterpillar and lead an extraordinary company that's been building a better world for 100 years. I'm excited to work alongside our talented team and the Cat dealer network as we focus on serving our customers. I'd also like to recognize Jim for his leadership and success throughout his distinguished 45-year career, and particularly his leadership for us over the last eight years as our CEO. I've really enjoyed working closely with Jim for many years, and I look forward to his support in the future in new role. So with that, Jim, I'll turn it over to you for final remarks here.
Jim Umpleby: Well, thank you, Joe, and thanks, everyone. We appreciate all your questions as always, and I've really enjoyed working with all of you. And you've made us better. So thank you for that. As I step back and reflect on all my time as CEO over the last eight years, I'm just incredibly proud of what our team has accomplished and our strong performance. Our strategy for long-term profitable growth served us well as we focused on serving our customers, investing in the best opportunities for growth and, of course, rewarding shareholders. And Joe talked about some of the macro trends that are out there, and based on that and based on I know what's going to be outstanding leadership by Joe and the executive office moving forward, I really believe that Caterpillar's best days lie ahead. So I know that Joe and the whole EO will do a great job leading our companies as we embark on our second century of helping customers build a better, more sustainable world. And with that, I'll turn it over to Alex. |
1,483 | CAT | 1 | 2,025 | 2025-04-30 08:30:00 | Caterpillar Inc. | 259,378 | Alex Kapper: Thank you, Jim, Joe, Andrew and everyone who joined us today. A replay of our call will be available online later this morning. We'll also post a transcript on our Investor Relations website as soon as it's available. You'll also find a first quarter results video with our CFO and an SEC filing with our sales to user’s data. Visit investors.caterpillar.com and then click on Financials to view those materials. If you have any questions, please reach out to me or Rob Rengel. The Investor Relations general phone number is 309-675-4549. Now let's turn it back to Audra to conclude our call.
Operator: That concludes our call. Thank you for joining. You may all disconnect. |
1,484 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | Operator: Ladies and gentlemen, thank you for standing by. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the Costco Wholesale Corporation Fourth Quarter 2024 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the conference over to Gary Millerchip, Chief Financial Officer. Gary, the floor is yours.
Gary Millerchip : Good afternoon, everyone, and thank you for joining Costco's Fourth Quarter 2024 Earnings Call. I'd like to start by reminding you that these discussions will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual events, results, and/or performance to differ materially from those indicated by such statements. The risks and uncertainties include, but are not limited to, those outlined in today's call, as well as other risks identified from time to time in the company's public statements and reports filed with the SEC. Forward-looking statements speak only as of the date they are made and the company does not undertake to update these statements except as required by law. Comparable sales and comparable sales excluding impacts from changes in gasoline prices and foreign exchange are intended as supplemental information and are not a substitute for net sales presented in accordance with GAAP. Now before we dive into our financial results for the quarter, I'm delighted to say that Ron Vachris is joining us for the call today. I'll now hand over to Ron for some opening comments. |
1,485 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | Ron Vachris : Thank you, Gary, and good afternoon, everyone. Thank you for joining us today. As we turn the page on fiscal year 2024, let me make a few comments on our progress during the year as a whole. Throughout the fiscal year 2024, we will continue to execute on our strategy of growing the top-line through delivering the highest quality goods at the lowest possible price to our members. As a management team, we continue to be incredibly proud of our 333,000 employees worldwide and the culture that they foster. The consistency of our financial results is a reflection of the commitment of our entire team to member service and the Costco experience. Most of these employees are led by our fantastic warehouse managers, who we view as executives in our company. Succession planning continues to be a key focal point for us, as we're continually working on identifying the future leaders of our company. In fiscal year 2024, we promoted 95 new warehouse managers. 85% of those promoted, started at Costco as an hourly employee. This promote from within culture and the long-term career it helps to build is core to who we are as a company, community member, and retailer. A few other highlights I'd like to mention. In fiscal 2024, we hit our target of 30 new warehouse openings. This included one relocation and resulted in 29 net new buildings. Highlights included our first-ever building in Maine, bringing us to 47 states, and our 600th US Building in Eau Claire, Wisconsin. We also continue to see significant opportunities worldwide, and our fiscal 2025 plan has 12 of our planned 29 openings coming outside of the US, including our fifth building in Spain, which opened in Zaragoza two weeks ago. With three of these warehouses being relocations, we expect to add 26 net new buildings in fiscal 2025. We continue to grow our e-commerce business, and Costco Logistics has had a remarkable year. Appliances and furniture in big and bulky has led the way, and Logistics delivered over 4.5 million items this last year, up 29% over the |
1,486 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | and furniture in big and bulky has led the way, and Logistics delivered over 4.5 million items this last year, up 29% over the year prior. Improvements in our items sortment, delivery times, and scheduling functionality all enhance the member experience. We have great momentum with this business and expect big and bulky items will be a key part of our continued progress with e-commerce in the coming year. Turning to technology, we're starting to realize the benefits from the work that was done this past year. Members are very excited about being able to check warehouse inventory via the Costco app. And the membership card scanners installed at the front doors have delivered on the goal of speeding up the checkout process. This has been very well received by our members. More improvements are currently underway, which should further benefit our business both online and in our warehouses. With that, I'll turn it back over to Gary to discuss the results for the quarter, and I'll jump back on during Q&A to field some questions. |
1,487 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | Gary Millerchip : Thanks, Ron. In today's press release, we reported operating results for the fourth quarter of fiscal 2024, the 16 weeks ended September 1st. As we did last quarter, we published a slide deck on our investor site, under Events and Presentations, with supplemental information to support today's press release. You might find it helpful to have this presentation in front of you as I walk through our results. Throughout this discussion, when we're comparing to last year's fourth quarter, the best way to normalize for the extra week is to multiply last year's results by [16-17] (ph). Net income for the 16-week fourth quarter came in at $2.354 billion, or $5.29 per diluted share, up from $2.16 billion and $4.86 per diluted share in the 17-week fourth quarter last year. This year's results included a non-recurring net tax benefit of $63 million, or $0.14 per diluted share, related to a transfer pricing settlement and true-ups of various tax reserves. Reported net income was up 9% year-over-year. Excluding this year's non-recurring tax benefit and normalized for the extra week, last year, net income and earnings per diluted share were up 12.7% and 12.6% respectively. Net sales for the fourth quarter were $78.2 billion, an increase of 1% from $77.4 billion in the fourth quarter last year. Adjusting for the extra week last year, net sales would have been up 7.3%. The following comparable sales reflect comparable locations year-over-year and 16 comparable retail weeks. US comp sales were up 5.3% or 6.3% excluding gas deflation. Canada comp sales were up 5.5% or 7.9% excluding gas deflation and FX. And other international comp sales were up 5.7% or 9.3% adjusted. This all led to total company comp sales of plus 5.4% or plus 6.9% adjusted for gas deflation and FX. Finally, e-commerce comp sales were up 18.9% or 19.5% adjusted for FX. In terms of Q4 comp sales metrics, foreign currencies relative to the US dollar negatively impacted sales by approximately 0.9%, while gasoline price deflation negatively |
1,488 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | currencies relative to the US dollar negatively impacted sales by approximately 0.9%, while gasoline price deflation negatively impacted sales by approximately 0.6%. Traffic or shopping frequency increased 6.4% worldwide and 5.6% in the US. Our average transaction, or ticket was negative 0.9% worldwide and negative 0.3% in the US. This includes the headwinds from gas deflation and FX. Adjusted for those items, ticket would have been positive 0.5% worldwide and positive 0.6% in the US. Moving down the income statement to membership fee income, we reported membership fee income of $1.512 billion, an increase of $3 million, or 0.2%, on one less week year-over-year. FX negatively impacted membership fee income by 0.9%. Excluding the impacts from the extra week last year, and FX normalized membership fee income was up 7.4%. In terms of renewal rates, at Q4 end, our US and Canada renewal rate was 92.9%, down one-tenth of a percent from Q3 end. This slight decrease related to an online membership promotion that we ran for a short period in fiscal year 2023, which resulted in over 200,000 new sign-ups. As those members entered the renewal rate calculation during Q4 fiscal year 2024, the lower renewal rates for that cohort, which is typical for digital promotions, had a negative impact on the overall US renewal rate. Outside of those sign ups, there were no meaningful changes in the US renewal rate. The worldwide rate came in at 90.5%, the same as Q3, with improvement internationally offsetting the slight negative in the US. We ended Q4 with 76.2 million paid household members, up 7.3% versus last year, and 136.8 million cardholders up 7% year-over-year. About half of new member signups in fiscal year 2024 were under 40 years of age. This percentage has been growing since COVID, and has lowered the average age of our member over the last few years. At Q4 end, we have 35.4 million paid executive memberships, up 9.6% versus last year. Executive members now represent 46.5% of paid members and 73.5% of worldwide sales. |
1,489 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | memberships, up 9.6% versus last year. Executive members now represent 46.5% of paid members and 73.5% of worldwide sales. Turning to gross margin. Our reported rate in the fourth quarter was higher year-over-year by 40 basis points, coming in at 11% compared to 10.6% last year and up 33 basis points, excluding gas deflation. Core was lower by 5 basis points and lower by 11 basis points without gas deflation. In terms of core margins on their own sales, our core-on-core margins were higher by 9 basis points. Ancillary and other businesses' gross margin was higher 44 basis points and higher 42 basis points, excluding gas deflation. This increase year-over-year was driven by gas and e-commerce. E-commerce benefited from strong sales growth, item mix, and fulfillment productivity. And gas margins benefited from some moderate tailwinds and lapping a slightly weaker quarter last year, but nothing as significant as the benefit in Q1 2024, as a result of the volatility from world events in that quarter. 2% rewards was higher by 4 basis points or 3 basis points without gas deflation, reflecting higher sales penetration from our executive members. And LIFO was a benefit of 5 basis points. We had an $8 million LIFO credit in Q4 this year compared to a $30 million charge in Q4 last year. Moving to SG&A. Our reported SG&A rate in the fourth quarter was higher year-over-year by 8 basis points, coming in at 9.04% compared to last year's 8.96%. SG&A was higher by 2 basis points adjusted for gas deflation. The operations component of SG&A was higher 4 basis points, but was flat excluding gas deflation. Higher wages went into effect for the last six weeks of the quarter in the US and Canada, which was a headwind for the quarter of approximately 4 basis points. Investing in our employees remains a key part of our strategy, and we will continue to focus on driving top-line sales and improving productivity to mitigate the incremental costs. Central was higher by 3 basis points and 2 basis points without gas deflation. Stock |
1,490 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | to mitigate the incremental costs. Central was higher by 3 basis points and 2 basis points without gas deflation. Stock compensation was flat year-over-year, and pre-opening was higher 1 basis point but flat without gas deflation. Below the operating income line, interest expense was $49 million versus $56 million last year, reflecting $1 billion of debt paydown in the second-week of Q4 this year. Interest income for the quarter was $138 million versus $201 million last year, primarily due to the $6.7 billion special dividend paid in January 2024. Interest income will continue to be a headwind in the first half of this year due to lower year-over-year cash balances and lower interest rates. FX and other was an $18 million loss this year versus a $37 million gain last year. This was primarily due to foreign exchange. In terms of income taxes, our tax rate in Q4 was 24.4%, compared to 27.1% in Q4 last year. As mentioned earlier, this year's rate benefited from $63 million of net tax discrete items. Adjusted for this benefit, the tax rate for the quarter would have been 26.4%. Turning now to some key items of note in the quarter. We opened 14 new warehouses in the fourth quarter, 10 in the US, 2 in Japan, and 1 each in Korea and China. Capital expenditure in Q4 was approximately $1.58 billion, bringing the total year spent to $4.71 billion. Taking a deeper look into core merchandising sales, once again, non-foods led the way with the highest comparable sales in Q4. Our buyers have done a fantastic job finding new and exciting items at great values. Golden jewelry, gift cards, toys and seasonal, home furnishings, tires, and housewares all were up double digits in the quarter. Health and beauty aids also performed well, as we have expanded and elevated that category with new high-end SKUs, both online and in warehouse, including assorted luxury fragrances at a 30% to 70% value to retail. Across the fresh departments, we saw high single digit growth, as our continued focus on value is resonating with our members. An |
1,491 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | the fresh departments, we saw high single digit growth, as our continued focus on value is resonating with our members. An example of this in the meat department is our Kirkland Signature boneless chicken tenderloins, where we lowered the price 13% and saw a 21% lift in pounds sold. In food and sundries, the introduction of more international food products such as paneer cheese, Punjabi cookies, and fried tofu kimbap are resonating extremely well with our members. We're also delivering greater value by adding some new Kirkland Signature items, such as our KS Organic Golden Maple Syrup and KS aerosol whipped cream. Kirkland Signature offers significant member value compared to the national brands and continues to grow at a faster pace than our business as a whole. Our goal is always to be the first to lower prices where we see the opportunities to do so. And just a few examples this quarter include KS Standard Foil, reduced from $31.99 to $29.99, KS Macadamia Nuts, reduced from $18.99 to $13.99, KS Spanish Olive Oil, 3 liter, reduced from $38.99 to $34.99, and KS Baguette 2-Packs reduced from [$5.99 to $4.99] (ph). Our commitment to sustainability and achieving lower emissions is also presenting opportunities to lower our costs. A great example of this is our KS laundry packs, which we recently converted from a rigid plastic tub to a pouch. This allowed us to reduce the plastic packaging by 80% and pass these cost savings onto the member, lowering the price by $1 from $19.99 to $18.99. We've also found success working with suppliers to localize production of bulky items, such as water, paper, and laundry detergents. By manufacturing these goods closer to the countries in which they're sold, both costs and emissions associated with the shipment of these goods are greatly reduced. This quarter, we introduced our new Japan-produced Kirkland Signature paper towels. In addition to the emissions benefits from no longer shipping millions of units of paper towels from the US to Asia, the reduced freight allowed us to |
1,492 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | benefits from no longer shipping millions of units of paper towels from the US to Asia, the reduced freight allowed us to lower the price by approximately 30%, or $8 per unit in that market. As production ramps up, we are in the process of transitioning our other Asian markets to locally produce skews. Shifting the production country of this one product will result in annual member savings of $30 million. Within ancillary businesses, pharmacy have the strongest sales percentage increase, driven by double digit growth in script counts. Our optical department also performed well, as more members have taken advantage of the exceptional values in brand name frames and sunglasses. On a like-for-like 16-week basis, gas sales were negative low single digits in the quarter as a result of the average price per gallon being 5% lower. This was partially offset by gallon growth of 3%. Inflation was once again effectively flat in the quarter across all core merchandise. Food and sundries and fresh foods were slightly inflationary and this was offset by deflation in non-foods. In the supply chain, we are seeing good flow of products through Panama and Baltimore. The Red Sea is a remaining pain point and is causing some relatively minor shipping delays. Product availability has generally been good with a few exceptions. Egg supplies are still being negatively impacted by avian influenza and prime beef and a handful of vegetable SKUs have been tight. As Ron shared earlier, we are pleased with the momentum in our digital business and continue to make good progress with our technology priorities. Our app was downloaded 3.5 million times in the quarter, bringing total downloads to approximately 39 million, and we recently upgraded the native search function on our US mobile app, leading to a doubling of the click-through rate on search results. E-commerce traffic, conversion rates and average order value were all up year-over-year, helping to drive another strong quarter of comparable sales growth. While continued strength in |
1,493 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | were all up year-over-year, helping to drive another strong quarter of comparable sales growth. While continued strength in bullion, was a meaningful tailwind to e-commerce comps, appliances, health and beauty aids, tires, toys, gift cards, hardware, housewares, home furnishings, optical and pharmacy all grew double digits year-over-year. The rollout of buy online and pickup in warehouse for TVs in the US market was also completed in Q4. This allows same-day pickup of a new TV for members who prefer not to wait for delivery. While buy online pickup in warehouse isn't cost effective for us on lower-priced items, for high-value items with high shipping costs like TVs, the freight savings more than offset the added labor, required in warehouses to fulfill those orders. We're now testing a similar program on laptops. Costco Next, our curated marketplace, while still small, continued to grow nicely in the quarter. We added 11 new vendors, bringing the total to 86 and adjusting for the extra week, gross sales grew nearly 40% year-over-year. A brief comment on the membership fee increase that went into effect on September 1. Due to deferred accounting, this will have minimal impact early in the year. The vast majority of the benefit will come in the back half of fiscal year 2025 and into fiscal year 2026. With that being said, our commitment to invest in our employees and members is continuous as evidenced by the July wage increase and lower prices such as the example shared on today's call. In closing, we are encouraged by our momentum exiting fiscal year 2024 and are excited about the growth opportunities ahead as we continue to execute our strategy of delivering exciting new items and greater value for members, innovating with Kirkland Signature and growing our warehouse footprint and digital capabilities globally. In terms of upcoming releases, we will announce our September sales results for the five weeks ending Sunday, October the 6th on Wednesday, October 9th after market close. That concludes our prepared |
1,494 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | for the five weeks ending Sunday, October the 6th on Wednesday, October 9th after market close. That concludes our prepared remarks. We'll now open the line up for Q&A. |
1,495 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Simeon Gutman with Morgan Stanley. Please go ahead.
Simeon Gutman: Questions. On the previous earnings call, there was a discussion about the possibility of greater SG&A leverage in the future as a lot of foundational investments have already been made shortly after Costco announced a membership fee increase and reinvestment into employee wages as well. While wage investments are clearly the right thing for the business and instrumental for Costco's culture and success, how should we reconcile this potential posture of driving more leverage but also adopting the same prior approach of putting upside back into wages. |
1,496 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | Gary Millerchip: Hi, yes. Good afternoon. Thanks for the question. As we think about our overall model for the company, our focus is on really achieving a balance across the business. And as you know, over the years, what we've done successfully at Costco is, continue to invest in members, continue to invest in lowering prices and value for our members and continuing to invest in our employees. And we believe that's going to be a critical part of our overall strategy going forward to make sure that we keep driving our top-line sales growth. You're absolutely right, during the quarter. And in fact, I think 3 times during the year, we shared -- we made various investments in our employees back in September 2023, we announced an increase in the starting wage. And then in March this year, we announced that we were increasing wages for a number of our managerial roles in the warehouses. And as you mentioned, we recently announced a further increase for all of our hourly employees in the warehouses and across our distribution network. And so from our perspective, we think that's an important part of continuing to support the top-line growth in the company. As you saw in the quarter, when you adjust SG&A for gas deflation and for looking particularly at the operational part of the business, the good news was we were able to effectively offset that cost -- those cost increases by driving productivity and driving sales leverage. And I think we've done that pretty consistently over time. And our expectation of ourselves is that we'll continue to do that. So I think for us, it's less about giving specific guidance on a particular measure but more looking over the long term of how we expect to be able to keep making those investments, but also driving leverage in our model to ensure we're sustainably driving top-line and driving profitable growth. Ron, anything you'd like to add?
Ron Vachris: No, I have to agree with you, Gary. |
1,497 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | Ron Vachris: No, I have to agree with you, Gary.
Simeon Gutman: Got it. That's really helpful. And just as a quick follow-up, can you speak to the impact of the card readers at the different stores you've rolled out so far? Should we be modeling potentially a lift in member counts or growth in addition to the MFI bump from the fee increase as well?
Ron Vachris: This is Ron. The purpose of the card readers at the front door, this is a system we've been using for over two years now in Europe and especially in the UK and we've piloted here in the US for about six months. Several different benefits for it. It gives our operators real-time traffic counts throughout the day. So we're able to adjust front-end lines that we need to open and close lines based on the fluctuations of business. We can monitor our fresh foods a little better because we know what the traffic counts look like and so forth. And it has also taken the friction of membership verification away from the front-end registers and move that to the front door, where we're able to look at people's membership status. We let them know if their renewals is due before they get to the front-end. So we've realized some very nice, healthy front-end improvements in productivity, and it's allowed our operators to manage the business much better throughout the day.
Operator: Your next question comes from Chris Horvers with JPMorgan. Please go ahead.
Chris Horvers: Thank you. Good evening. I’m going – hopefully you can hear me. The question is can you talk about the risk around the port strike that's emerging here. What percentage of the product do you -- comes through those defected ports. Any description on maybe the categories that are more exposed versus the others? And to what extent have you tried to bring in product early for the holidays to try to manage that risk? |
1,498 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | Ron Vachris: Yes. This is Ron again. Yes, I'll take that question. The port strike is something we've been watching very closely for some time. We knew about the timing of this as well. When you think about the impact to our business, we import primarily nonfoods and some limited food and sundries come in, but nonfoods is less -- about 25% of our total business and only a subset of that is important. There's some domestic goods in there as well that are not imported in nonfoods. We have done a little bit of everything that you spoke about. We've got contingency plans, we've cleared the ports, we've pre-shipped. We've done several different things that we could to get holiday goods in, ahead of this time frame and looked at alternate plans that we could execute with moving goods to different ports and coming across the country if needed. It could be disruptive based on how impactful, I can't tell you until we know length and what could happen out there. But it is in our sights. Our buyers are all over it. They're watching it closely, and we've taken as many preemptive measures as we could to prepare for this.
Chris Horvers: And then just as a quick follow-up. As you think about the risk around ocean freight rates, is your expectation that freight rates are maybe elevated right now because of all this and perhaps come down into next year as we think about contract renewal periods? Thanks.
Ron Vachris: I'm not good at predicting the future, but I can tell you that from what we're seeing a big chunk of our freight comes in under contract. So we've been insulated from that. The spot market has peaked in the last quarter. We see that coming off now. If a port disruption could happen or something else could happen in the Red Sea, could that go up? Absolutely, it could go up. But from what we're seeing now, the spot market did increase is coming off at this point. And again, our team did a great job by insulating us with good solid contracts for this year.
Chris Horvers: Thanks so much. |
1,499 | COST | 4 | 2,024 | 2024-09-26 17:00:00 | Costco Wholesale Corporation | 92,817 | Chris Horvers: Thanks so much.
Operator: Your next question comes from the line of Chuck Grom with Gordon Haskett. Please go ahead.
Chuck Grom: Thanks. Good afternoon, Gary and Ron, just to go back to the membership card scanners. Can you just speak to where you are on the rollout of that across the US? And any positive reactions you've seen so far? Our checks have shown that in some locations you guys are actually seeing a double-digit increase in new sign-ups.
Ron Vachris: Yes. We have about 350 US warehouses rolled out at this point and through the process, reaction has been very positive. Myself, all our operators, and we really rely on feedback of our warehouse managers and what's been done. And our head operator, Russ Miller, and myself have been met with great positive reactions both from the members and from the operators as well. We have seen some lift in member sign-ups from that. We have also seen a lift in renewals because before people get to the front end, now they're aware that my renewal is going to be due when I get to the registers, so members are very appreciative about that. They know that and they get up to the front, and they're not shocked by that process as well. So improved productivity, improved interaction. And as we know, as our volumes grow, we're looking for everything we can find to use technology to help get our members through the front ends in a good, smooth manner.
Chuck Grom: That's very helpful. And then my follow-up, just, Gary, on the other business line and within the margin build up 42 basis points ex-gas. Can you add a little bit of color on the sequential change? How much came from e-comm or how much came from the improvement in gas margins? Thank you. |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.