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Caterpillar Inc.
CEO : Mr. D. James Umpleby III

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2022 Q4	20.3% YoY	4.3%	-28.7%	2023-01-31

Andrew Bonfield says,

Q4 2022 Sales and Revenues

• Sales and revenues increased by 20% or $2.8 billion to $16.6 billion.
• Sales were higher than expected due to strong price realization and volume, partially offset by currency impacts.
• Volume was supported by the impact of changes in dealer inventory and an 8% increase in sales to users.

Operating Profit and Adjusted Operating Profit

• Operating profit increased by 4% or $69 million to $1.7 billion due to strong price realization and volume growth, mostly offset by a goodwill impairment charge, higher manufacturing costs, and restructuring expenses.
• Adjusted operating profit was $2.8 billion, up $1.2 billion versus the prior year, with an adjusted operating profit margin of 17.0%, which was an increase of 560 basis points versus the prior quarter due to favorable price realization and volume growth, which outpaced manufacturing cost increases.

Adjusted Profit per Share

• Adjusted profit per share increased by 43% to $3.86 in Q4 2022 compared to $2.69 in Q4 of the previous year.
• Adjusted profit per share figures exclude mark-to-market gains for the remeasurement of pension and OPACC plans and restructuring items.

Investor Day Margin Targets

• Fourth quarter margins were lower than expected, as well as being lower than where they needed them to be to meet the Investor Day margin target.
• Margin targets are progressive, and in the current high inflation environment, the company adjusted the target for the sales range to reflect the inflationary increases.
• Depending on the inflationary environment, we’ll have to revisit the range next January.

Segment Performance

• Construction Industries sales increased by 19% in Q4 2022 to $6.8 billion. Fourth quarter profit for Construction Industries increased by 87% versus the prior year to $1.5 billion, with an operating margin of 21.7%, an increase of 780 basis points versus last year.
• Resource Industries sales grew by 26% in Q4 2022 to $3.4 billion. Fourth quarter profit for Resource Industries increased by 110% versus the prior year to $605 million, with an operating margin of 17.6%, an increase of 700 basis points versus last year.
• Energy & Transportation sales increased by 19% in Q4 2022 to $6.8 billion, with sales up across all applications. Fourth quarter profit for Energy & Transportation increased by 26% versus the prior year to $498 million, with an operating margin of 7.3%, an increase of 20 basis points versus last year.

James Umpleby III says,

Strong Q4 2022 Results

• Sales rose by 20% versus Q4 2021, better than expected, reflecting healthy demand across most end markets for products and services
• Adjusted operating profit margins increased to 17%, an all-time record, as margins improved both sequentially and year-over-year
• Adjusted profit per share was $3.86, an all-time record, despite an unfavorable foreign currency headwind

Full-Year 2022 Highlights

• Sales of $59.4 billion, up 17% versus last year, driven by favorable price realization and higher sales volume
• Services revenues of $22 billion, a 17% increase over 2021, benefiting from ongoing initiatives and investments as well as price realization
• Adjusted operating profit margin was 15.4%, a 170 basis point increase over 2021, impacted by supply chain inefficiencies, ongoing inflationary pressures within manufacturing costs, and investment for profitable growth
• Generated ME&T free cash flow of $5.8 billion, in line with the investor day range of $4 billion to $8 billion, and returned $6.7 billion to shareholders through dividends and share repurchases

End Market Outlook

• Construction Industries: Positive momentum in North America, with growth expected in non-residential construction due to government-related infrastructure investments, healthy backlogs, and rental replenishment. Flat to slightly down in Latin America versus strong 2022 performance. Growth expected in Asia Pacific, excluding China, due to public infrastructure spending and supportive commodity prices
• Resource Industries: Expect healthy mining demand to continue as commodity prices remain above investment thresholds, and production and utilization levels to remain elevated. Autonomous solutions continue to gain momentum. Heavy construction and quarry and aggregates anticipate continued growth, supported by infrastructure and major non-residential construction projects. Energy transition expected to support increased commodity demand.
• Energy & Transportation: Sales growth expected due to strong order rates in most applications, new equipment orders for solar turbines remain robust, power generation orders expected to remain healthy, including data center strength, and industrial remains healthy
• Rail: North American locomotive sales expected to remain muted, strength expected in high-speed marine as customers continue to upgrade aging fleets

Q & A sessions,

Inventory Management and Production Plans

• The company pays close attention to the marketplace and works with dealers to avoid excess inventory in the channel.
• Non-residential construction constitutes 75% of Construction Industries, and the company expects it to grow despite some moderation in residential construction.
• The company modifies production plans as appropriate, and some products need to be produced more due to supply chain issues in some areas.

Mining Business

• Mining customers’ capital discipline is leading to moderate year-on-year growth.
• The company has a strong backlog, high utilization of equipment, and encouraging quotation activity with customers.

Autonomous Solution and Other Trends

• The company is encouraged by its autonomous solution and believes it has the best solution in the industry.
• The quarry and ag businesses, included in RI, also have positive trends due to infrastructure spending.

Investments in Services

• The company is making investments to improve services and has more connected assets, strong ecommerce capabilities, and increasing sales.
• Over 60% of new equipment in 2022 was delivered with a CVA, creating a customer touchpoint to demonstrate value.
• The company is investing heavily in AI, prioritized service events to give dealers a lead on aftermarket service and repair in advance, and parts availability to ensure the right parts are in the right place at the right time.