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Caterpillar (CAT) Q4 Earnings Top, Sales Up Y/Y on Higher Pricing
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Caterpillar Inc. (CAT - Free Report) reported adjusted earnings per share of $5.23 in the fourth quarter of 2023, which beat the Zacks Consensus Estimate of $4.75 by a margin of 10%. The bottom-line figure marked a 35.5% year-over-year improvement.
Favorable price realization and manufacturing costs, largely reflecting lower freight and improved performance in the Energy & Transportation segments, mainly led to the improvement in CAT’s earnings for the quarter. While the Construction Industries segment reported higher sales of equipment to end users, the main reason for volume decline for the segment (as well as the Resource Industries segment) was due to changes in dealer inventories.
Including one-time items, Caterpillar’s earnings per share were $5.28, up 89% from the prior-year quarter’s earnings of $2.79 per share.
Revenues Up on Favorable Price Realization
The company reported fourth-quarter revenues of around $17.07 billion, which missed the Zacks Consensus Estimate of $17.15 billion. The top line rose 3% from the year-ago quarter mainly due to favorable price realization. This helped offset the impact of lower volumes due to changes in dealer inventories, partially offset by higher sales of equipment to end users.
Improved results in the Energy & Transportation segment were offset by weaker performances in Construction Industries and Resource Industries segments. North America was the only region to witness a 11% year-over-year improvement in sales in the fourth quarter. This was offset by a 6% sales decline in EAME, a 5% decline in Latin America and a 3% drop in sales in Asia Pacific.
Caterpillar Inc. Price, Consensus and EPS Surprise
In the quarter under review, the cost of sales decreased 5% year over year to $11 billion. While the segments faced reflecting inflated material costs, unfavorable cost absorption, an increase in period manufacturing costs and the impact of manufacturing inefficiencies, these were somewhat offset by lower freight costs.
Gross profit improved 21.5% year over year to $6.1 billion. The gross margin was 35.5% in the quarter under review, up from 30% in the year-ago quarter.
Selling, general and administrative expenses increased 19% year over year to around $2 billion. Research and development expenses were up 38% to $554 million. This was mainly due to CAT’s investments aligned with strategic initiatives.
CAT reported an operating profit of $3.13 billion in the fourth quarter of 2023 compared with $1.68 billion in last year’s quarter. Favorable price realization and the absence of a 2022 goodwill impairment charge related to the Rail division, helped offset higher selling, general and administrative and research and development expenses, thus leading to an 86.5% year-over-year jump in profits. The operating margin was 18.4% in the reported quarter, up from 10.1% in the year-ago quarter.
Adjusted operating profit was around $3.2 billion in the quarter, up 15% from $2.8 billion in the year-ago quarter. The adjusted operating margin was 18.9% in the fourth quarter of 2023 compared with 17% in the year-ago quarter.
Segment Performances
Machinery and Energy & Transportation (ME&T) sales rose 2% year over year to around $16.24 billion in the quarter under review.
Construction Industries' sales were down 5% year over year to $6.5 billion on lower sales volume, somewhat offset by favorable price realization. While the segment witnessed higher sales of equipment to end users, changes in dealer inventory led to the decline in volumes. Sales were up 4% in North America but plunged 25% in Latin America, declined 18% and EAME and 4% in Asia Pacific.
The segment’s total sales were lower than our estimate of $6.9 billion, which had factored in a volume decline of 0.2% and pricing growth of 1.1% for the quarter. The segment reported volume decline of 12% and a favorable price impact of 6.5%, which led to the variance.
Sales in the Resource Industries segment were down 6% year over year to around $3.24 billion as lower volumes offset the gains from improved price realization. Sales volume was impacted lower aftermarket parts sales volume as well as changes in dealer inventories. Sales in EAME plunged 25% while North America reported year-over-year decline of 9%. Sales at Asia Pacific and Latin America however improved 6% and 5%, respectively.
The segment’s fourth-quarter sales were lower than our projection of $3.3 billion. We had expected the segment’s volume to decline 4.6% and a pricing growth of 1.1% for the quarter. The segment reported a 13% decline in volume, which was offset by an 7.1% favorable impact from pricing.
Sales of the Energy & Transportation segment in the quarter were around $7.7 billion, reflecting growth of 12% driven by improved sales volume and a favorable price realization. The segment reported sales growth in Power Generation (29%), Oil and Gas (23%), and Transportation (11%), which was offset by a 5% decline in sales to the Industrial sector.
For the Energy & Transportation segment, our sales estimate was $7.47 billion, with volume growth at 9.4% and pricing at 1.5%. The segment’s volume growth was 10% in the fourth quarter while pricing improved 5%.
The ME&T segment reported an operating profit of $3.1 billion, which reflected an improvement of 90% year over year. The Construction Industries segment’s operating profit rose 3% year over year to $1.43 billion. The Resource Industries segment’s operating profit dipped 1% year over year to $0.6 billion in the fourth quarter. The Energy & Transportation segment’s operating profit increased 21% year over year to $1.43 billion.
Financial Products’ total revenues climbed 15% to $981 million from the year-ago quarter due to higher average financing rates in each of the regions and higher average earning assets in North America. The segment's profits were $234 million in the reported quarter, which was 24% higher than the year-ago quarter. This was aided by lower provision for credit losses at Cat Financial, higher average earning assets and higher net yield on average earning assets, which was partially offset by an increase in selling, general and administrative expenses.
Cash Position
During 2023, Caterpillar’s operating cash flow was $12.9 billion compared with $7.8 billion in the prior year. Through the year, the company returned $7.5 billion to shareholders as dividends and share repurchases. CAT ended 2023 with cash and equivalents of around $7 billion, flat compared with 2022 end.
Record Results in 2023
Caterpillar reported a record adjusted earnings per share of $21.21 in 2023, which beat the Zacks Consensus Estimate of $20.60. The bottom-line surged 53% year over year. Including one-time items, Caterpillar’s earnings per share were $20.12 compared with $12.64 in 2022.
The company reported revenues of around $67.06 billion in 2023, another record for the year. The top-line figure, however, missed the Zacks Consensus Estimate of $67.13 billion. The top line improved 13% year over year, aided by favorable price realization and improved sales volumes.
Price Performance
Over the past year, the Caterpillar stock has gained 25.3% compared with the industry’s 24.3% growth.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for AZZ’s fiscal 2024 earnings per share is pegged at $4.19. The consensus estimate for 2024 earnings has moved 2% north in the past 60 days. The company has a trailing four-quarter average earnings surprise of 37.6%. AZZ shares have rallied 52% in the past year.
Applied Industrial has an average trailing four-quarter earnings surprise of 13.9%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have been unchanged in the past 60 days. The company’s shares have gained 26.3% in a year.
Eaton has an average trailing four-quarter earnings surprise of 4.2%. The Zacks Consensus Estimate for ETN’s fiscal 2024 earnings is pinned at $10.00 per share, which indicates year-over-year growth of 10.8%. The estimate has moved up 0.3% in the past 60 days. The company’s shares have gained 66% in a year.
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Caterpillar (CAT) Q4 Earnings Top, Sales Up Y/Y on Higher Pricing
Caterpillar Inc. (CAT - Free Report) reported adjusted earnings per share of $5.23 in the fourth quarter of 2023, which beat the Zacks Consensus Estimate of $4.75 by a margin of 10%. The bottom-line figure marked a 35.5% year-over-year improvement.
Favorable price realization and manufacturing costs, largely reflecting lower freight and improved performance in the Energy & Transportation segments, mainly led to the improvement in CAT’s earnings for the quarter. While the Construction Industries segment reported higher sales of equipment to end users, the main reason for volume decline for the segment (as well as the Resource Industries segment) was due to changes in dealer inventories.
Including one-time items, Caterpillar’s earnings per share were $5.28, up 89% from the prior-year quarter’s earnings of $2.79 per share.
Revenues Up on Favorable Price Realization
The company reported fourth-quarter revenues of around $17.07 billion, which missed the Zacks Consensus Estimate of $17.15 billion. The top line rose 3% from the year-ago quarter mainly due to favorable price realization. This helped offset the impact of lower volumes due to changes in dealer inventories, partially offset by higher sales of equipment to end users.
Improved results in the Energy & Transportation segment were offset by weaker performances in Construction Industries and Resource Industries segments. North America was the only region to witness a 11% year-over-year improvement in sales in the fourth quarter. This was offset by a 6% sales decline in EAME, a 5% decline in Latin America and a 3% drop in sales in Asia Pacific.
Caterpillar Inc. Price, Consensus and EPS Surprise
Caterpillar Inc. price-consensus-eps-surprise-chart | Caterpillar Inc. Quote
Higher Sales Boost Margins
In the quarter under review, the cost of sales decreased 5% year over year to $11 billion. While the segments faced reflecting inflated material costs, unfavorable cost absorption, an increase in period manufacturing costs and the impact of manufacturing inefficiencies, these were somewhat offset by lower freight costs.
Gross profit improved 21.5% year over year to $6.1 billion. The gross margin was 35.5% in the quarter under review, up from 30% in the year-ago quarter.
Selling, general and administrative expenses increased 19% year over year to around $2 billion. Research and development expenses were up 38% to $554 million. This was mainly due to CAT’s investments aligned with strategic initiatives.
CAT reported an operating profit of $3.13 billion in the fourth quarter of 2023 compared with $1.68 billion in last year’s quarter. Favorable price realization and the absence of a 2022 goodwill impairment charge related to the Rail division, helped offset higher selling, general and administrative and research and development expenses, thus leading to an 86.5% year-over-year jump in profits. The operating margin was 18.4% in the reported quarter, up from 10.1% in the year-ago quarter.
Adjusted operating profit was around $3.2 billion in the quarter, up 15% from $2.8 billion in the year-ago quarter. The adjusted operating margin was 18.9% in the fourth quarter of 2023 compared with 17% in the year-ago quarter.
Segment Performances
Machinery and Energy & Transportation (ME&T) sales rose 2% year over year to around $16.24 billion in the quarter under review.
Construction Industries' sales were down 5% year over year to $6.5 billion on lower sales volume, somewhat offset by favorable price realization. While the segment witnessed higher sales of equipment to end users, changes in dealer inventory led to the decline in volumes. Sales were up 4% in North America but plunged 25% in Latin America, declined 18% and EAME and 4% in Asia Pacific.
The segment’s total sales were lower than our estimate of $6.9 billion, which had factored in a volume decline of 0.2% and pricing growth of 1.1% for the quarter. The segment reported volume decline of 12% and a favorable price impact of 6.5%, which led to the variance.
Sales in the Resource Industries segment were down 6% year over year to around $3.24 billion as lower volumes offset the gains from improved price realization. Sales volume was impacted lower aftermarket parts sales volume as well as changes in dealer inventories. Sales in EAME plunged 25% while North America reported year-over-year decline of 9%. Sales at Asia Pacific and Latin America however improved 6% and 5%, respectively.
The segment’s fourth-quarter sales were lower than our projection of $3.3 billion. We had expected the segment’s volume to decline 4.6% and a pricing growth of 1.1% for the quarter. The segment reported a 13% decline in volume, which was offset by an 7.1% favorable impact from pricing.
Sales of the Energy & Transportation segment in the quarter were around $7.7 billion, reflecting growth of 12% driven by improved sales volume and a favorable price realization. The segment reported sales growth in Power Generation (29%), Oil and Gas (23%), and Transportation (11%), which was offset by a 5% decline in sales to the Industrial sector.
For the Energy & Transportation segment, our sales estimate was $7.47 billion, with volume growth at 9.4% and pricing at 1.5%. The segment’s volume growth was 10% in the fourth quarter while pricing improved 5%.
The ME&T segment reported an operating profit of $3.1 billion, which reflected an improvement of 90% year over year. The Construction Industries segment’s operating profit rose 3% year over year to $1.43 billion. The Resource Industries segment’s operating profit dipped 1% year over year to $0.6 billion in the fourth quarter. The Energy & Transportation segment’s operating profit increased 21% year over year to $1.43 billion.
Financial Products’ total revenues climbed 15% to $981 million from the year-ago quarter due to higher average financing rates in each of the regions and higher average earning assets in North America. The segment's profits were $234 million in the reported quarter, which was 24% higher than the year-ago quarter. This was aided by lower provision for credit losses at Cat Financial, higher average earning assets and higher net yield on average earning assets, which was partially offset by an increase in selling, general and administrative expenses.
Cash Position
During 2023, Caterpillar’s operating cash flow was $12.9 billion compared with $7.8 billion in the prior year. Through the year, the company returned $7.5 billion to shareholders as dividends and share repurchases. CAT ended 2023 with cash and equivalents of around $7 billion, flat compared with 2022 end.
Record Results in 2023
Caterpillar reported a record adjusted earnings per share of $21.21 in 2023, which beat the Zacks Consensus Estimate of $20.60. The bottom-line surged 53% year over year. Including one-time items, Caterpillar’s earnings per share were $20.12 compared with $12.64 in 2022.
The company reported revenues of around $67.06 billion in 2023, another record for the year. The top-line figure, however, missed the Zacks Consensus Estimate of $67.13 billion. The top line improved 13% year over year, aided by favorable price realization and improved sales volumes.
Price Performance
Over the past year, the Caterpillar stock has gained 25.3% compared with the industry’s 24.3% growth.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
Caterpillar currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are AZZ Inc. (AZZ - Free Report) , Applied Industrial Technologies (AIT - Free Report) and Eaton Corp. (ETN - Free Report) . Each of these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for AZZ’s fiscal 2024 earnings per share is pegged at $4.19. The consensus estimate for 2024 earnings has moved 2% north in the past 60 days. The company has a trailing four-quarter average earnings surprise of 37.6%. AZZ shares have rallied 52% in the past year.
Applied Industrial has an average trailing four-quarter earnings surprise of 13.9%. The Zacks Consensus Estimate for AIT’s 2024 earnings is pinned at $9.43 per share, which indicates year-over-year growth of 7.8%. Estimates have been unchanged in the past 60 days. The company’s shares have gained 26.3% in a year.
Eaton has an average trailing four-quarter earnings surprise of 4.2%. The Zacks Consensus Estimate for ETN’s fiscal 2024 earnings is pinned at $10.00 per share, which indicates year-over-year growth of 10.8%. The estimate has moved up 0.3% in the past 60 days. The company’s shares have gained 66% in a year.