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CATERPILLAR INC (CAT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue $16.2B and adjusted EPS $5.14; GAAP EPS $5.78. Sales fell 5% YoY on lower volume, while adjusted operating margin slipped to 18.3% from 18.9% .
  • Energy & Transportation remained resilient: segment profit rose 3% YoY and power generation sales jumped 22% on data center demand; Construction (-8% sales) and Resource (-9% sales) were weaker .
  • Management guided 2025 sales slightly lower, adjusted OP margin in the top half of the target range, ME&T FCF in the top half of $5–10B; Q1 2025 margins expected lower vs prior year due to dealer inventory and pricing headwinds—an important near-term catalyst .
  • Backlog increased $1.3B sequentially to ~$30B, with strong order activity in power generation and turbines tied to AI/data centers; dealer machine inventory decreased ~$1.6B in Q4 .

What Went Well and What Went Wrong

What Went Well

  • Strong Energy & Transportation pricing and profitability: segment profit up 3% YoY; power generation sales +22% on data center demand .
  • “Record adjusted profit per share and strong ME&T free cash flow” for 2024; services revenue reached a record $24B, supported by digital tools and >1.5M connected assets .
  • Backlog rose to ~$30B (+$1.3B QoQ), led by E&T; multi‑year customer planning and robust solar turbines pipeline (Titan 350) cited by management .

What Went Wrong

  • Consolidated Q4 sales down 5% YoY to $16.2B driven by lower volume and dealer inventory reductions; adjusted OP margin fell to 18.3% (from 18.9%) and was below expectations .
  • Construction Industries faced unfavorable price realization (~$300M) and margin compression (19.6%, −390bps YoY); Resource Industries sales down 9% on dealer inventory decreases .
  • Services growth slower than expected and timing delays (international locomotives) pressured E&T top line; Q1 2025 margin seasonality expected to be atypically weak due to price/mix and lower dealer inventory build .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Sales & Revenues ($B)$16.7 $16.1 $16.2
Profit per Share ($)$5.48 $5.06 $5.78
Adjusted EPS ($)$5.99 $5.17 $5.14
Operating Margin (%)20.9% 19.5% 18.0%
Adjusted Operating Margin (%)22.4% 20.0% 18.3%
  • YoY: Q4 sales down 5% vs Q4’23; adjusted EPS down to $5.14 from $5.23; operating margin down to 18.0% from 18.4% .
  • QoQ: Q4 sales slightly above Q3 ($16.2B vs $16.1B) but margins declined (18.0% vs 19.5% GAAP) .

Segment breakdown (Q4 2024 vs Q4 2023):

SegmentSales Q4’23 ($B)Sales Q4’24 ($B)Segment Profit Q4’23 ($MM)Segment Profit Q4’24 ($MM)
Construction Industries$6.519 $6.003 $1,535 $1,174
Resource Industries$3.242 $2.962 $600 $466
Energy & Transportation$7.669 $7.649 $1,429 $1,477
Financial Products Revenues$0.981 $1.024 $234 $166

KPIs and other metrics:

KPIQ2 2024Q3 2024Q4 2024
Dealer Machine Inventory Change ($B)~Flat vs Q2’23; dealer inventory decreased YoY Built less than prior year; YOY unfavorable −$1.6 (machines); total −$1.3
Backlog ($B)——~$30 (+$1.3 QoQ)
Power Generation Sales growth YoY+15% +26% +22%
Cat Financial Past Dues (%)1.74% (Q2) 1.74% (Q3) 1.56% (YE)
ME&T Free Cash Flow ($B, FY)——$9.4
Enterprise Cash ($B, YE)——$6.9
Tax Rate excl. discrete (Q4)——22.2%

Non‑GAAP adjustments (Q4 2024):

  • Discrete tax benefit $0.46/share (currency translation); pension/OPEB MTM gains $0.23/share; restructuring $0.05/share .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales & RevenuesFY 2025—Slightly lower vs FY 2024 Lower
Adjusted Operating MarginFY 2025—Top half of target range Maintained high range
ME&T Free Cash FlowFY 2025—Top half of $5–$10B Maintained
Global Annual Effective Tax Rate (excl. discrete)FY 2025—~23% —
Price Realization (Machines)FY 2025—~−1% impact to sales for full year; worse in H1 Lower
CapExFY 2025—~$2.5B Higher vs 2024
Dealer Machine InventoryFY 2025 YE—End 2025 similar to YE 2024 Flat
Q1 SeasonalityQ1 2025—Lower sales and adjusted OP margin vs prior year; less dealer inventory build Lower

Earnings Call Themes & Trends

TopicQ2 2024 (Prev. Mentions)Q3 2024 (Prev. Mentions)Q4 2024 (Current)Trend
Data centers / AI power demandPower gen +15%; large reciprocating engines growth Power gen +26%; turbines/services strength Power gen +22%; strong backlog and Titan 350 adoption; capacity expansion underway Strengthening demand; capacity constrained
Pricing/merchandising headwindsFavorable price in E&T; CI price favorable, but volume down Favorable price in E&T; machines pricing unfavorable Machines price realization negative from post‑sales merchandising; worse in H1’25 Headwind peaking H1’25
Dealer inventory dynamicsQ2: dealer inventory decreased YoY Q3: dealer inventory build less than prior year; unfavorable Q4: −$1.6B (machines); −$1.3B total; Q1’25 build much lower Normalizing down
E&T capacity/lead times (Solar)—International locomotive timing issues Strong solar backlog; add test cells/build pits; supplier constraints; no new factory needed Scaling within footprint
Regional CI/RI trendsCI: NA ~flat; EAME/APAC down CI sales −9%; NA −11%; EAME/APAC down CI sales −8%; NA −14%; LatAm +6%; EAME/APAC slight declines; RI −9% Mixed; NA CI soft
Oil & Gas cycleTurbines up in Q2; O&G mixed O&G slightly down; turbines offset 2025 moderate growth; reciprocating engines/services slightly down; Solar growth in O&G Gradual improvement in turbines

Management Commentary

  • “We delivered record adjusted profit per share and higher adjusted operating profit margin… Services revenue grew to a record level… robust ME&T free cash flow” (Jim Umpleby) .
  • “Power generation sales to users grew 27%… driven by data center applications. Backlog increased to $30B, led by Energy & Transportation” .
  • “We anticipate 2025 sales and revenues to be slightly lower… adjusted operating profit margin in the top half of our target range… ME&T free cash flow in the top half of $5–$10B” .
  • On solar turbines capacity: “We can increase capacity without building new factories… supplier components are a limiting factor” .

Q&A Highlights

  • Data center demand: Management “very encouraged” with multi‑year customer orders; reciprocating capacity targeted +125% over 2023; Titan 350 gaining acceptance .
  • Dealer inventory outlook: 2025 YE machines expected similar to YE 2024; Q1’25 build much lower than typical; CI pressure from merchandising programs (~$300M Q4 impact) .
  • Oil & Gas cycle: Expect moderate 2025 growth overall; reciprocating engines/services slightly down; solar turbines backlog strong, activity in US gas transmission compression .
  • Pricing/margins trajectory: Price cost headwind mostly H1’25; margins guided to top half of range for FY 2025 despite volume and depreciation headwinds .

Estimates Context

  • S&P Global consensus estimates (EPS/revenue/EBITDA) for Q4 2024 and prior quarters were unavailable due to a SPGI request limit error; therefore, vs‑estimates comparisons are not provided in this recap [SPGI error in GetEstimates].

Key Takeaways for Investors

  • Near‑term: Expect softer Q1 2025 sales/margins due to lower dealer inventory build and machine pricing headwinds; trading caution into Q1 is warranted .
  • Medium‑term: E&T strength (power generation, turbines) underpinned by AI/data center demand; backlog at ~$30B supports visibility despite CI/RI softness .
  • Mix shift: E&T profitability offsetting CI/RI pressures; watch price realization and absorption impacts in CI/RI until merchandising programs roll off in H2’25 .
  • Capital allocation: ME&T FCF targeted top half of $5–$10B in 2025; ongoing buybacks/dividends remain a support, though share count tailwind may moderate versus 2024 .
  • Capacity catalysts: Solar Titan 350 and reciprocating engine capacity expansion (+125% vs 2023 over several years) are structural growth levers tied to data center buildout .
  • Risk monitor: Pricing/program headwinds, supplier constraints for turbines, and regional construction softness (NA CI −14% in Q4) could cap margins in H1’25 .
  • Credit quality: Cat Financial past dues improved to 1.56% (lowest since 2005), providing stability in financing operations .