Caterpillar Inc. — Q1 2024 Form 10-Q
Business context and period. Unaudited results cover the three months ended March 31, 2024, compared with Q1 2023. Caterpillar reports Machinery, Energy & Transportation (ME&T) and Financial Products; its principal operating segments are Construction Industries, Resource Industries, Energy & Transportation, and Financial Products. Dollar amounts are in U.S. dollars.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Sales and revenues | $15.799 billion | $15.862 billion |
| Operating profit / margin | $3.519 billion / 22.3% | $2.731 billion / 17.2% |
| Adjusted operating profit margin | 22.2% | 21.1% |
| Profit attributable to common shareholders | $2.856 billion | $1.943 billion |
| Diluted profit per share | $5.75; adjusted $5.60 | $3.74; adjusted $4.91 |
| Operating cash flow | $2.052 billion | $1.573 billion |
| ME&T free cash flow | $1.269 billion | $1.365 billion |
| Cash and cash equivalents at period end | $4.959 billion | $6.978 billion at Dec. 31, 2023 |
| Total debt | $37.85 billion | Down $25 million from year-end 2023 |
| Total assets / shareholders’ equity | $83.741 billion / $17.645 billion | $87.476 billion / $19.503 billion at year-end 2023 |
Revenue was approximately flat: lower sales volume ($684 million) and unfavorable currency ($30 million) were largely offset by favorable price realization ($575 million) and higher Financial Products revenue ($76 million). Operating profit increased 29%; improvement reflected the absence of the prior-year Longwall divestiture loss and favorable pricing, partly offset by lower volume. The effective tax rate was 19.5%, versus 26.9%, primarily reflecting the different tax treatment of divestiture-related items.
By segment, Construction Industries revenue fell 5% to $6.424 billion and segment profit declined 1% to $1.764 billion. Resource Industries revenue fell 7% to $3.193 billion and profit fell 4% to $730 million. Energy & Transportation revenue rose 7% to $6.681 billion and profit rose 23% to $1.301 billion. Financial Products revenue rose 10% to $991 million and segment profit rose 26% to $293 million.
Cash flow from operations rose by $479 million year over year, with higher profit and lower working-capital requirements contributing; higher incentive-compensation payments were a partial offset. Cash declined about $2.02 billion from year-end, principally as financing cash outflows included $4.455 billion of share repurchases and $648 million of dividends. ME&T free cash flow was lower year over year. Current assets were $43.664 billion and current liabilities $32.371 billion at quarter-end. Available credit was $10.863 billion; there were no borrowings under the $10.5 billion global credit facilities.
In February, Caterpillar entered accelerated share repurchase agreements for $3.50 billion; $4.455 billion of shares were repurchased during the quarter in total. The filing reports 489.3 million shares outstanding at March 31. The board maintained the quarterly dividend at $1.30 per share in April.
Outlook, commentary, and risks
- Full-year 2024: Management continues to expect sales and revenues broadly similar to 2023, slightly favorable price realization, and no significant change in machine dealer inventories. It expects restructuring costs of $300–$450 million, capital expenditures of $2.0–$2.5 billion, and an annual effective tax rate of 22.5% excluding discrete items.
- Segment and end-market expectations: Management expects lower Resource Industries sales, driven mainly by off-highway and articulated trucks; slightly higher Energy & Transportation sales; and healthy North American construction demand. It anticipates continued services growth across the three primary segments. Power Generation demand is expected to remain strong, including from data-center growth.
- Q2 2024: Management expects lower sales and revenues than Q2 2023, with lower machine dealer inventories and lower Construction and Resource Industries sales; Energy & Transportation sales are expected to be about flat. Favorable pricing is expected to partly offset volume and inventory pressures.
- Backlog: Firm order backlog was approximately $27.9 billion, about $0.4 billion above Q4 2023; $6.0 billion was not expected to be filled in the following 12 months.
- Risks and uncertainty: Management cites global economic and end-market conditions, inflation and labor costs, supply-chain constraints, commodity prices, foreign exchange, interest rates, dealer inventory decisions, competition, credit-market access, Cat Financial delinquencies, and regulatory, legal, environmental, and cybersecurity exposures. It noted increasing industry delinquencies amid weaker global growth, although Cat Financial’s portfolio delinquencies were relatively low. The filing reports no material change to previously disclosed risk factors.
- Unusual items and contingencies: Q1 2024 included $64 million of restructuring income from a non-U.S. mining-entity divestiture and $58 million of other restructuring costs; Q1 2023 included a $586 million Longwall divestiture loss. Perkins settled a California emissions matter in March 2024, paying a civil penalty and environmental-project contribution of approximately $0.4 million combined. The company says environmental remediation accruals and reasonably possible losses from unresolved legal actions are not material, and no material guarantee losses are anticipated.
Important facts for investors to verify
- Whether volume softness in Construction and Resource Industries, and the expected Q2 dealer-inventory decline, develop as management anticipates.
- Whether full-year revenue, pricing, restructuring-cost, capital-expenditure, and tax-rate expectations remain on track.
- Cash generation and liquidity after substantial repurchases; confirm the final share count and settlement of the $3.50 billion accelerated repurchase agreements.
- Trends in Cat Financial delinquencies, write-offs, and credit-loss allowances, particularly given management’s warning about rising industry delinquencies.
- Whether supply-chain, inflation, currency, interest-rate, and end-market risks materially affect margins or demand. The filing states interim results are not necessarily indicative of full-year results.