Caterpillar

Caterpillar is a global manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives.

Employees: 107,700

Revenue: $59.4 billion for FY2022

HQ Location: Irving, Texas, United States

What they do:

• Manufacturer of machinery - across five product lines

• 4m+ Cat products at work around the world

• 62% of sales and revenues outside of United States

• 160 dealers in Cat Dealer Network serving 193 countries

Their vision and priorities:

• Services growth is a core focus of the strategy. “We have a bold goal to double our Machinery, Energy and Transportation (ME&T) services sales to $28bn by 2026 from our 2016 baseline”

• Expanded offerings - “we are growing our product line beyond core performance products….to reach more customers than ever before.”

• Operational excellence - safety, quality, lean, competitive, and flexible cost structure

• Sustainability - “We are committed to further reducing Caterpillar’s greenhouse gas emissions while helping our customers meet their climate-related objectives”

• Our goal - Profitable Growth. Profitable Growth is our clear definition of winning. It allows us to invest in future products and services and in our people. Higher profits mean more money to invest in our company and improve our position as a global leader.

Outlook 2023

• They expect sales in 2023 to increase versus 2022 supported by favorable price

• They expect stronger sales to users in 2023 and no significant change in dealer inventory by year-end

• They expect 2023 adj. operating profit to increase versus 2022 and to be within their 2023 adj. operating profit margin range

• They expect the price to more than offset manufacturing costs

• They anticipate increases in SG&A and R&D as they continue to invest in strategic initiatives

• They increased pension expenses in other income (expense) of about $80M per quarter in 2023

• Their restructuring expense is expected to be about $700 million

• Capex of about $1.5 billion

• They estimate a global tax rate of about 23%, excluding discrete items

Things to know right now

• Prototype battery-powered machines

  Caterpillar is demonstrating prototype versions of battery-powered machines.

  To help support the company’s sustainability objectives they are focused on delivering products that reduce the carbon impact during their usage on job sites.

• Increased connections and new App launched

  They have over 1.4 million connected assets, up from 1.2 million in 2021. They delivered over 60% of their new equipment with a customer value agreement and the launch of their new app, called Cat Central which helped drive growth in e-commerce sales to users.

• The first autonomous solution in the aggregates industry announced

  They achieved an industry first of moving over 5 billion tons autonomously across 25 mine sites worldwide. They have collaborated with Luck Stone, the nation's largest family-owned and operated producer of crushed stone, sand, and gravel to expand these solutions beyond mining.

What does each business unit do?

Construction Industries

Helping customers to build what the world needs.

Products for building roads and the built environment. Diggers, cranes, demolition equipment and products for government and defense customers.

Approx 40% of sales.

Resource Industries

Making it possible for customers to profitably mine and harvest natural resources.

Products including agriculture and mining equipment, and solutions for forestry and transporting materials.

Approx 20% of sales.

Energy and Transportation

Delivering solutions for customer’s growing energy and transportation needs.

Products including industrial power, marine engines, rail locomotives.

Approx 40% of sales.

Competitors

• Astec Industries

• Dresser-Rand

• Alamo Group

• John Deere

Their financial calendar

Q1: January-March - Earnings 27th April

Q2: April-June - Earnings 1st August

Q3: July-September - Earnings 31st October

Q4: September-December - Earnings 31st January

Next Earnings Report:

27th April 2023

Results from the Year-end 2022:

Positives from the Year-end 2022:

• Full-year sales and revenues up 17%, at $59.4 billion. The increase reflected favorable price realization and higher sales volume, driven by the impact of changes in dealer inventories, increased services, and higher sales of equipment to end users.

• Dealers increased their inventories by $2.4 billion in 2022, while remaining about flat in 2021.

• Full-year profit per share of $12.64; adjusted profit per share of $13.84

• Strong operating cash flow of $7.8 billion; ended the year with $7.0 billion of enterprise cash

• Returned $6.7 billion to shareholders through share repurchases and dividends in 2022

Results from the last earnings report (Q4FY22):

Positives from the last earnings report (Q4FY22):

• Fourth-quarter 2022 sales and revenues are up 20% or $2.8B. Sales increased across the three primary segments. There was a favorable impact from price realization and higher sales volume which was partially offset by currency impacts.

• Fourth-quarter 2022 profit per share of $2.79; adjusted profit per share of $3.86

• Operating Profit Increased $69M or 4% this was due to favorable price realization and increased sales volume. This was mostly offset by a goodwill impairment charge, higher manufacturing costs, and restructuring expenses. Unfavorable manufacturing costs reflected higher material costs, unfavorable cost absorption, and period manufacturing costs.

• Per segment:

  • Construction Industries

    Total Sales Increased $1,109M or 19%

    • North America had favorable price realization and higher volume

    • Latin America had favorable price realization and higher volume

    • EAME had favorable price realization and higher volume, partially offset by unfavorable currency impacts

    Segment Profit Increased $693M or 87% due to Favorable price realization and higher sales volume

  • Resource Industries

    Total Sales Increased $717M or 26% due to favorable price realization and higher sales volume

    Segment Profit Increased $317M or 110% due to favorable price realization and higher sales volume. This was partially offset by increased material costs, freight, and higher manufacturing costs.

  • Energy and Transportation

    Total Sales Increased $1,095M or 19%

    Oil and Gas sales increased due to an increase in turbines and turbine-related services, reciprocating engines, and aftermarket parts

    Power Generation sales increased due to an increase in reciprocating engines and turbine and turbine-related services

    Industrial sales increased due to an increase in sales across all regions

    Transportation sales increased due to an increase in marine applications, reciprocating engine aftermarket parts, and rail services these increases were partially offset by lower deliveries of locomotives.

    Segment Profit Increased by $492M or 72%. These increases are due to favorable sales volume and price realization.

  • Financial Products

    Total Revenues Increased by $77M or 10% due to higher average financing rates across all regions.

Challenges from the last earnings report (Q4FY22):

• Fourth-quarter 2022 included an unfavorable ME&T foreign currency impact of $0.41 per share in other income (expense), which negatively impacted profit per share and adjusted profit per share

• Per segment:

  • Construction Industries

    • Asia/Pacific had unfavorable currency impacts and lower volume, partially offset by favorable price realization

  • Financial Products

    Segment Profit Decreased $59M or 24% due to higher provisions for credit losses and unfavorable impacts from equity securities.