• Fourth Quarter Sales and Revenues: $16.2 billion, a 5% decrease year-over-year.
• Fourth Quarter Adjusted Operating Profit Margin: 18.3%.
• Fourth Quarter Adjusted Profit Per Share: $5.14.
• Fourth Quarter ME&T Free Cash Flow: $3 billion.
• Full Year Sales and Revenues: $64.8 billion, a 3% decrease compared to 2023.
• Full Year Services Revenues: $24 billion, a 4% increase over 2023.
• Full Year Adjusted Operating Profit Margin: 20.7%.
• Full Year Adjusted Profit Per Share: $21.90, a 3% increase over 2023.
• Full Year ME&T Free Cash Flow: $9.4 billion.
• Backlog: Increased by $1.3 billion to $30 billion since last quarter end.
• Dealer Inventory Decrease: $1.3 billion in the fourth quarter.
• Construction Industries Sales: Decreased by 8% in the fourth quarter to $6 billion.
• Resource Industries Sales: Decreased by 9% in the fourth quarter to $3 billion.
• Energy & Transportation Sales: Flat at $7.6 billion in the fourth quarter.
• Financial Products Revenues: Increased by 4% to about $1 billion in the fourth quarter.
• 2025 Sales and Revenues Outlook: Expected to be slightly lower compared to 2024.
• 2025 ME&T Free Cash Flow Outlook: Expected to be in the top half of the $5 billion to $10 billion target range.

• Warning! GuruFocus has detected 5 Warning Signs with ROP.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Caterpillar Inc (NYSE:CAT) achieved record adjusted profit per share in 2024, marking a 3% increase over 2023.
• The company generated $9.4 billion of ME&T free cash flow, near the top of their target range.
• Services revenue grew to a record level, with a 4% increase to $24 billion in 2024.
• Caterpillar Inc (NYSE:CAT) returned $10.3 billion to shareholders through share repurchases and dividends in 2024.
• The backlog increased by $1.3 billion to $30 billion, indicating strong future demand, particularly in Energy & Transportation.

Negative Points

• Sales and revenues for the fourth quarter were down 5% compared to the previous year, primarily due to lower sales volume.
• The adjusted operating profit margin for the fourth quarter was below expectations at 18.3%, impacted by lower volume and an unfavorable mix.
• Caterpillar Inc (NYSE:CAT) anticipates a slight decrease in sales and revenues for 2025, with lower sales expected in Construction Industries and Resource Industries.
• Price realization is expected to be unfavorable in 2025, contributing to a decrease in sales.
• The company faces challenges with delivery delays in Energy & Transportation and slower-than-expected services growth.

Q & A Highlights

Q: How is Caterpillar viewing the data center business, and what are the expectations for demand? A: Jim Umpleby, Chairman and CEO, stated that Caterpillar continues to see strong demand for both reciprocating engines and gas turbines, driven by data center growth. Customers are planning orders over multiple years, and the company is expanding capacity for large reciprocating engines by 125% over the next several years.

Q: What is the outlook for dealer inventories, particularly in North American construction? A: Andrew Bonfield, CFO, explained that dealer inventories are expected to remain stable in 2025. While there was a build in 2023 and a reduction in 2024, the expectation is for no significant change in 2025, based on dealer conversations and market outlook.

Q: Can you provide an outlook on the oil and gas business, particularly regarding gas compression? A: Jim Umpleby noted that moderate growth is expected in 2025 for oil and gas. While reciprocating engine services may decline slightly, solar turbines have a healthy backlog and order activity, particularly in gas compression and transmission in the U.S.

Q: How is Caterpillar managing price-cost dynamics, and what are the expectations for 2025? A: Andrew Bonfield mentioned that while material costs are expected to decline, other manufacturing costs, including depreciation, will offset this benefit. The company anticipates price realization to be slightly negative due to post-sales merchandising programs, particularly impacting the first half of 2025.

Q: What are the expectations for the Energy & Transportation segment in 2025, considering capacity constraints? A: Jim Umpleby stated that while capacity constraints exist, particularly in large engines, investments are being made to increase capacity by 125% over four years. Growth is expected in 2025, but capacity expansion will take time to fully impact sales.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.